cardno
financial
report
Table of Contents
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Directors’ Report ................................................................................................................... 2
Corporate Governance Statement............................................................................................ 25
Consolidated Statement of Financial Performance ...................................................................... 32
Consolidated Statement of Comprehensive Income .................................................................... 33
Consolidated Statement of Financial Position ............................................................................ 34
Consolidated Statement of Changes in Equity ........................................................................... 35
Consolidated Statement of Cash Flows .................................................................................... 36
Notes to the Financial Statements ........................................................................................... 37
Directors’ Declaration ............................................................................................................ 80
Independent Auditor’s Report ................................................................................................. 81
Additional Shareholder Information .......................................................................................... 83
Corporate Directory ............................................................................................................... 86
Page 1 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
The Directors present their report together with the consolidated financial statements of Cardno
Limited (the Company) being the Company and the entities it controlled at the end of, or during, the
year ended 30 June 2012.
1. Directors
The Directors of the Company in office during or since the year ended 30 June 2012 are set out
below:
John Massey (Chairman - Non-Executive)
Andrew Buckley (Managing Director - Executive)
Anthony Barnes (Non-Executive)
Peter Cosgrove (Non-Executive)
Jeffrey Forbes (Executive and Company Secretary)
Trevor Johnson (Executive)
Ian Johnston (Non-Executive)
John Marlay (Non-Executive) (appointed 1 November 2011)
Tonianne Dwyer (Non-Executive) (appointed 25 June 2012)
Details of the qualifications, experience and responsibilities of the Directors are on pages 3 to 5.
2. Company Secretary
Jeffrey Forbes BCom, MAICD, MAusIMM was appointed to the position of Company Secretary on
10 July 2006.
Michael Pearson LLB, BA, ACIS was appointed to the position of Joint Company Secretary on
24 September 2009.
Page 2 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Director
Experience
John C Massey
BCom, CPA, FAICD(Life), FAIM
Non-Executive Chairman
Age 66
is Chairman of
Special Responsibilities
As well as being Chairman of the Company,
the Board and
John
Nominations Committee, and a member of the
Remuneration Committee (Chairman of the
Committee until 14 February 2012).
Andrew D Buckley
BE(Hons), FIEAust, FAICD
Managing Director
Age 55
Special Responsibilities
Andrew is a member of the Nominations
Committee
Anthony H (Tony) Barnes
BCom
Non-Executive Director
Age 62
Special Responsibilities
Tony is Chairman of the Board’s Audit, Risk &
Compliance Committee and a member of the
Remuneration Committee.
Peter J Cosgrove AC, MC
ndc (Ind), jssc, psc (US), Dip Mil Stud, FAICD
Non-Executive Director
Age 65
Special Responsibilities
Peter
Committee
is a member of
the Nominations
John Massey has been Chairman of Cardno Limited since July
2004 and a Non-Executive Director since March 2004. He has
extensive commercial and leadership experience as a Chairman,
Director and Chief Executive spanning many different industries.
John is also Chairman of Sunstate Cement Limited and UQ
Holdings, and a Director of Stockyard Beef Group. His previous
appointments include such diverse companies as Brisbane
Airport, Dairy Australia, Macmahon, Grainco, Thomas Cook and
QDL Pharmaceuticals.
In 2006, John was made a Life Fellow of the Australian institute
of Company Directors for eminence in the field of directorship
and was also subsequently awarded the 2010 Gold Medal which
recognises the Outstanding Company Director in Queensland for
achievements in corporate life and to the community.
Andrew was appointed Managing Director of the Cardno Group
in 1997. He has over thirty years’ experience
in the
management of design and implementation of engineering
infrastructure, environment
and development assistance
projects. Andrew has worked in the design and construction of
mining, engineering and infrastructure projects in Australia,
Africa, USA and Asia. He has held senior management roles in
the engineering, construction and development assistance
sectors for over 20 years. Under Andrew’s leadership the
Cardno Group has grown from an annual turnover of
approximately $14 million in FY1997 to $960 million in FY2012
and from less than 200 people to over 7,000.
Tony Barnes has been a Non-Executive Director of Cardno since
31 July 2008. He was formerly the Chief Financial Officer of
Zinifex Limited, an
international mining, exploration and
development company. He also held the position of Chief
Executive Officer of Zinifex Limited for a period. He played a key
role in the successful IPO of Zinifex Limited in May 2004 and its
subsequent restructure culminating in the merger with Oxiana
Limited in July 2008 to form Oz Minerals Limited. Tony has
extensive financial experience following a career which included
more than 32 years with BHP, both within Australia and
Internationally.
Tony is also a Director of the Victorian Rugby Union Inc and the
Parent – Infant Research Institute.
Retired General Peter Cosgrove joined Cardno as a Non-
Executive Director in March 2007, bringing with him a wealth of
experience and credentials. Peter is a director of Qantas Airways
Limited, Qantas Superannuation Limited, and Australian Rugby
Union Limited. He is Chancellor of the Australian Catholic
University and holds a number of prestigious memberships and
appointments including being a member of the Trustee Board of
the Commonwealth Superannuation Corporation. Peter was
Chief of the Australian Defence Force from July 2002 until July
2005. In 1999 he was appointed as Commander of the
International Forces in East Timor and helped the country
transition to independence. Peter was awarded the Military
Cross in Vietnam and he was appointed as a Companion of the
Military Division of the Order of Australia, Companion of the
New Zealand Order of Merit (CNZM) and Commander of the
United States Legion of Merit. In 2001 Peter was the Australian
of the Year.
Page 3 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Director
Experience
Jeffrey I Forbes
BCom, MAICD, MAusIMM
Chief Financial Officer, Company Secretary,
Executive Director
Age 59
Trevor C Johnson
BE, MEngSc, PhD, FIEAust, CPEng, RPEQ,
MAICD
Executive Director
Age 55
Special Responsibilities
Trevor was a member of the Board’s Audit,
Risk & Compliance Committee and retired on
25 June 2012.
Ian J Johnston
DipCM, GradDip App Fin & Inv, ASIA, ACSA,
ACIS, FAICD
Non-Executive Director
Age 63
Special Responsibilities
Ian is a member of the Board's Audit, Risk &
Compliance Committee, the Remuneration
Committee and the Nominations Committee.
John Marlay, B.Sc., FAICD
Non-Executive Director
Age 63
Special Responsibilities
John is Chairman of the Board’s Remuneration
Committee and a member of the Nominations
Committee.
Jeff joined Cardno in July 2006 as Chief Financial Officer,
Company Secretary and Executive Director, Finance. Jeff has
more than 33 years’ experience as a finance manager, primarily
in the resources sector prior to joining Cardno.
Jeff has significant experience in the financing and development
of resource projects in both Australia and in the Asia Pacific
region. He has held senior positions domestically and
internationally. Prior to joining Cardno he was an Executive
Director, Chief Financial Officer and Company Secretary of
Highlands Pacific Limited. Jeff has significant experience in
capital raisings and during his career has worked for a number of
major companies including Rio Tinto, BHP and CSR.
Trevor has been a director of the Cardno Group since 1996, and
an employee of the company for more than 25 years. He is a
member of the Senior Executive team which assists the
Managing Director in running the company.
In his executive role as Director Corporate, Trevor is responsible
for a number of acquisition, co-ordination and communication
activities within Cardno.
Trevor has more than 30 years’ experience as a civil engineer,
with special expertise in the fields of hydraulics, water quality
and environmental analysis. He remains significantly involved in
the company’s operational activity, and
frequently
commissioned as a technical expert witness on engineering
matters.
is
Ian Johnston became a Non-Executive Director of Cardno
Limited
in November 2004 bringing with him extensive
experience in treasury, corporate banking and equity capital
markets.
Following a career of nearly 25 years in the banking industry, Ian
joined RBS Morgans in 1988 as an Executive Director and Head
of Corporate Finance and in 2003 became Chairman of
Corporate Finance and a member of the Advisory Board.
He is also a Director of Data #3 Limited and RBSM Foundation
Limited. He is also a member of the National Trust of
Queensland Brisbane City Hall Conservation Appeal Committee.
Ian’s previous Board appointments include The Rock Building
Society Limited and Northern Energy Corporation Ltd.
John Marlay joined Cardno as a Non-Executive Director in
November 2011. He is also a Non-Executive Director of Incitec
Pivot Limited (since 2006), Boral Limited (since 2009), Alesco
Corporation Limited (since 2011) and the Independent Chairman
of Tomago Aluminum Company (since 2010).
From 2002 to 2008 John held the position of Chief Executive
Officer and Managing Director of Alumina Limited.
John held various senior management roles with Pioneer
International Limited and Hanson PLC from 1995 to 2002. Prior
to that John also held executive management positions with
James Hardie Ltd and Esso Australia Ltd.
Page 4 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Director
Tonianne Dwyer
BJuris (Hons), LLB (Hons), GAICD
Non-Executive Director
Age 49
Special Responsibilities
Tonianne was appointed a member of the
Board’s Audit, Risk & Compliance Committee
on 1 July 2012.
3. Principal Activities
Experience
Tonianne Dwyer became a Non-Executive Director of Cardno
Limited in June 2012. She is also a Non-Executive Director of
DEXUS Property Group and of DEXUS Wholesale Property Fund.
Tonianne’s executive career has included roles as Executive
Director and Head of Funds Management at Quintain Estates and
Development (2003-2010), Director, Investment Banking at
Societe Generale/SG Cowen/Hambros Bank in London (1987-
2003).
The principal activity of the consolidated entity during the financial year was operating as a provider of
professional services in physical and social infrastructure. There were no changes to the principal
activities of the Cardno Group during the financial year under review.
4. Review of Results and Operations
Cardno achieved a record net profit after tax of $74.2 million for the year ended 30 June 2012, a 26%
increase over the 2011 financial year. Basic earnings per share was 61.73 cents, a 9.7% increase on
the prior year of 56.29 cents. EBITDA rose 28% to $128.7 million compared to the 2011 financial
year of $100.2 million.
The record profit for the year ended 30 June 2012 is the eighth consecutive year of annual profits and
earnings per share growth since listing on the ASX in 2004.
Revenue was $965.8 million, a 16% increase on the 2011 financial year despite the impact of the
stronger Australian dollar.
Cardno had strong operating cash flow of $72.6 million in the 2012 financial year.
Cardno’s balance sheet remains strong with a debt to equity ratio of 36.2% and cash of $107.9 million
at 30 June 2012.
The record profit for the year ended 30 June 2012 reflects Cardno’s focus on high growth markets and
strategic acquisitions. A number of major factors contributed to this result. These included improved
conditions in Australia led by resources and energy, continuing strong performance from the US
business despite variable economic conditions, and ongoing contributions from acquisitions.
During the financial year Cardno made five acquisitions:
Cardno Lane Piper, a 40 person environmental and geotechnical engineering firm based in
Melbourne, Victoria in September 2011;
Cardno Geotech Solutions, a 22 person geotechnical engineering and construction material testing
firm based in Newcastle, New South Wales in October 2011;
Cardno TEC, a 330 person consulting firm with specialist expertise in environmental management,
asset management and marine infrastructure management headquartered in Charlottesville, Virginia,
USA in October 2011;
Cardno HRP, a 62 person town planning consultancy, environmental planning and landscape
architecture group based in Brisbane, Queensland in November 2011; and
Cardno ATC, a major 1,600 person consulting services firm providing environmental services,
building sciences, geotechnical, construction material testing and other consultancy services
headquartered in Lafayette, Louisiana, USA in March 2012.
Page 5 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
In the second half of the 2012 financial year Cardno successfully completed a $112.0 million capital
raising from a fully underwritten placement of $45.0 million and a 1:9 fully underwritten renounceable
rights issue of $67.0 million. The proceeds from the placement and rights issue were used to fund, in
part, the acquisition of Cardno ATC and to maintain Cardno’s balance sheet strength and flexibility for
future growth.
The Board has declared a final dividend of 18 cents per share (70% franked) to be paid on 12 October
2012 to all shareholders registered on 14 September 2012. With the interim dividend of 18.0 cents
per share (70% franked) in April 2012, this will result in a full year dividend of 36 cents per share
(70% franked), which is also a record for Cardno.
Cardno continues to perform strongly across its markets and geographical locations and remains well
positioned for further expansion through organic growth and strategic acquisitions.
5. Dividends
Dividends paid or declared by the Company to members since the end of the previous financial year
were:
Type
Declared and paid during the year
- Final 2011 ordinary
- Interim 2012 ordinary
Declared after end of year
- Final 2012 ordinary
Dealt with in the financial report as:
- Dividends paid or provided
- Noted as a subsequent event (Note 28)
Cents per share
Total amount
$’000
Franked
Date of payment
17.0
18.0
18.0
18,665
24,823
70%
70%
14 October 2011
4 April 2012
24,931
70%
12 October 2012
43,488
24,931
68,419
6. Events Subsequent to the Reporting Date
On 2 July 2012, Cardno acquired 100% of Marshall Miller & Associates, Inc and EM-Assist Inc for up
to US$31.0 million and US$14.3 million respectively. Each of the acquisitions has a percentage of the
purchase price subject to the attainment of performance targets. Marshall Miller & Associates, Inc is a
180-person mining, energy and environmental consulting firm headquartered in Virginia, USA while
EM-Assist Inc is a 150-person environmental services and compliance management firm headquartered
in California, USA. The acquisitions were funded by a combination of cash (from available cash
reserves and debt facilities) and shares issued.
On 13 August 2012, the Directors of Cardno Limited declared a final dividend of 18 cents per share
(70% franked) for the 2012 financial year. The dividend will be paid on 12 October 2012 to
shareholders registered on 14 September 2012 and will total $24,931,153. The dividend has not been
provided for in the 30 June 2012 financial statements.
7. Likely Developments
Cardno will continue to manage its global business in physical and social infrastructure and pursue its
policy of growing both organically and by acquisition during the next financial year.
8. Significant Changes in the State of Affairs
Other than as disclosed elsewhere in this Director’s Report, there have been no significant changes in
the state of affairs since 30 June 2011.
Page 6 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
9.
Indemnification and Insurance of Officers
The Company has agreements with each of the Directors and Officers of the Company in office at the
date of this report indemnifying them against liabilities to any person other than the Company or a
related body corporate that may arise from their acting as Directors or Officers of the Company. The
indemnity continues to have effect when the Directors and Officers cease to hold office, other than
where such liabilities arise out of conduct involving a wilful breach of duty by the Officers or the
improper use by the Directors or Officers of their position or of information to gain advantage for
themselves or someone else or to cause detriment to the Company.
The Directors have not included details of the nature of the liabilities covered or the amount of the
premium paid in respect of the Directors’ and Officers’ liability, as such disclosures are prohibited under
the terms of the contract.
10. Directors’ Meetings
Attendance at Board meetings and Board Committee meetings for the year ended 30 June 2012 is set
out below:
No. of Meetings Held
A H Barnes
A D Buckley
P J Cosgrove
T Dwyer*
J I Forbes
T C Johnson**
I J Johnston
J Marlay***
J C Massey
Board of
Directors
A
13
14
13
1
14
13
14
9
14
B
14
14
14
1
14
14
14
9
14
Audit, Risk &
Compliance
Committee
B
A
4
-
4
4
4
-
4
4
Remuneration
Committee
Nominations
Committee
A
7
7
7
7
B
7
7
7
7
A
6
6
6
2
6
B
6
6
6
2
6
not a member of this committee
A = number of meetings attended.
B = number of meetings held during the time the Director held office during the year or was a committee member.
* Tonianne Dwyer was appointed to the Board on 25 June 2012 and the Audit, Risk and Compliance Committee from
1 July 2012.
** Trevor Johnson resigned from the Audit, Risk and Compliance Committee on 25 June 2012.
*** John Marlay was appointed to the Board, Remuneration and Nominations Committees on 1 November 2011.
11. Remuneration Report - Audited
The Board has designed Cardno’s remuneration strategy to ensure its Managing Director and key
management personnel are strongly aligned to achieving Cardno’s business strategies and delivering
value to shareholders.
Cardno’s vision is to be a world leader in the provision of professional services to improve the physical
and social environment. This vision will be achieved through focussing on our people, clients, growth,
quality, safety and performance.
To achieve this vision we have designed the following remuneration strategy.
Remuneration Strategy
The Cardno group's remuneration strategy is designed to attract, retain and motivate appropriately
qualified and experienced key management personnel in the engineering and professional consulting
services sector. The ability of Cardno to deliver long term shareholder value relies significantly upon
the capability of these key management personnel to drive business performance and client service
satisfaction.
Page 7 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
including
remuneration,
Cardno's remuneration strategy is provided through a framework which includes a mix of fixed and
variable
incentives
(Total Remuneration), designed to maximise the financial performance and growth of the Company
over time. In general, the remuneration approach includes a reasonable percentage of potential annual
remuneration for key management personnel to be delivered as at risk variable remuneration. The
Board has determined that this remuneration method is likely to contribute significantly to improved key
management personnel performance and better financial outcomes achieved in Cardno's operations.
long-term performance-based
short-term
and
Fixed Annual Remuneration for key management personnel is generally targeted at median levels
compared to similar roles in the Cardno comparator group.
Exceptional performance by any individual key management person, as a result of achieving both
superior financial results and specified business performance targets, which are demonstrably beyond
expectations (i.e. exceeding at-target performance outcomes) can result in Total Remuneration for that
key management person towards the 75th percentile compared to similar roles in the Cardno
comparator group.
Cardno's business operations are international in their geographic reach, with employees located and
operating in Australia and approximately 85 countries including New Zealand, the USA, and in
countries in Europe, South America, Africa, Asia Pacific region and the Middle East. Cardno's
remuneration framework is designed to reward our staff competitively in each country, and to promote
their focus on growth in the business and for the retention of talented and motivated staff.
The Cardno Board retains discretion in approving the Managing Director’s and the key management
personnel’s short term incentive (STI) payment and for the awarding of any Performance Rights as a
long term incentive (LTI) award under the Performance Equity Plan (PEP). The Board is mindful of
proposed Federal Government legislative changes in remuneration practices for publicly-listed
companies (including potential remuneration clawback provisions), and intends to review Cardno's
executive remuneration policy and practices when the final legislative requirements are published.
Underlying Principles of Cardno’s Remuneration Strategy
a) Components of Remuneration
Fixed Annual Remuneration (FAR) remunerates key management personnel in line with market
benchmarks and performance taking into account responsibilities of the individual’s position, level
of skill and experience and demonstrated performance in support of Cardno values.
Short Term Incentives (STI) rewards the achievement or exceeding of both financial and
non-financial group, divisional, and personal objectives. The STI also provides alignment with
shareholder rewards through improved short term earnings growth and business development.
Long Term Incentives (LTI) reward key management personnel for Cardno performance over a
3 year period. The LTI provides a retention element through an exposure to Cardno equities and an
alignment with shareholder rewards through increasing total shareholder return (TSR).
b) Market Positioning
Cardno targets the FAR for key management personnel to align with the median against similar
roles in a group of comparator companies. A range around the median provides flexibility to
recognise capability and contribution, value to the organisation, individual performance and the
tenure of individuals.
Key management personnel Total Remuneration, including FAR, STI and LTI is also targeted to be
consistent with the median against similar roles in comparator companies. The Total Remuneration
potential for the achievement of stretch performance against specific STI targets for individual key
management personnel has the capacity to reach the 75th percentile compared to similar roles in
the market for comparator companies.
Page 8 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
c) Benchmarking remuneration
The primary source for remuneration benchmarking is a group of Australian listed companies in the
Industrial Sector in the range of half to double Cardno’s market capitalisation. For the Managing
Director and key management personnel, remuneration levels for comparable roles in appropriate
international jurisdictions are also taken into account.
d) Remuneration Committee
The Committee is responsible for reviewing and advising the Board on remuneration policies and
practices. The Committee also reviews and advises the Board on the design and implementation of
share rights and option schemes, incentive performance packages, superannuation entitlements,
retirement and termination entitlements and fringe benefits policies.
The remuneration of Directors, Managing Director, key management personnel, managers and staff
is reviewed by the Remuneration Committee which then provides recommendations to the Board.
Board decisions on the remuneration of the Managing Director and key management personnel are
made in the absence of the Executive Directors as appropriate.
The Committee obtains independent advice on the appropriateness of remuneration based on trends
in comparative companies both locally and internationally. In 2012 the Committee engaged
Ernst & Young to provide remuneration recommendations regarding the provision of market
remuneration benchmarking reports for the Managing Director, other key management personnel
and Non-Executive Directors. Ernst & Young has provided its recommendations to the Remuneration
Committee.
The Committee is satisfied the advice received from Ernst & Young regarding the above services, is
free from undue influence from the key management personnel to whom the advice relates, as the
relevant criteria, as established by the Board have been satisfied. The criteria used by the Board are
that the key management personnel to whom the advice relates were not involved in the selection
and appointment of, or contract negotiation with, Ernst & Young as remuneration advisors. All
documentation and communication (including confirmation by Ernst & Young that the remuneration
recommendations were free from undue influence from the key management personnel to whom the
advice relates) were provided directly to the Remuneration Committee. Additionally, the Board has
put in place policies managing Ernst & Young’s access to key management personnel on
remuneration-related matters,
including parameters for communication and the types of
communication that can take place between Ernst & Young and key management personnel, to
further ensure the recommendations are free from undue influence.
The remuneration recommendations were provided to the Remuneration Committee as an input into
decision making only. The Committee considered the recommendations, along with other factors, in
making its remuneration decisions. In 2012 the total fees paid to Ernst & Young for the
remuneration recommendations were $58,400.
Other remuneration related service fees and expenses relating to a review of the PEP were $16,500.
The members of the Committee during the year were: John Marlay (Committee Chairman since
February 2012), John Massey (retired as Committee Chairman from February 2012), Ian Johnston
and Tony Barnes, all independent Non-Executive Directors.
The Committee met 7 times during the year and committee members’ attendance record is
disclosed in the table of directors’ meetings on page 8.
Page 9 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Key Management Personnel Remuneration Structure
Cardno’s key management personnel executive remuneration is structured as a mix of FAR and variable
remuneration through at risk STI and LTI components. The mix of these components varies for
different management levels but with a higher weighting to at risk remuneration as a percentage of
Total Remuneration than other comparator group companies. This is seen as an important driver of
Cardno’s financial performance and long term growth in support of shareholders’ interests.
Fixed remuneration is designed to provide a base salary whilst STI and LTI programs only reward key
management personnel when selected business performance conditions, and financial and management
outcomes are satisfied or exceeded. Participation in both STI and LTI schemes for the Managing
Director and key management personnel are subject to continuing employment and the discretion of
the Board.
a) Fixed Annual Remuneration (FAR)
FAR consists of a base salary including superannuation. Cardno benchmarks key management
personnel FAR at the median compared to similar roles in market comparator companies. The
comparator companies are those in the ASX 300 with half to double Cardno’s average market
capitalisation and with a similar organisational size operating within a similar industry group. Key
management personnel have the flexibility to receive their FAR as cash, superannuation, and fringe
benefits such as motor vehicles.
Remuneration levels are reviewed annually by the Remuneration Committee and recommendations
made to the Board through a process that considers the individual, segment and overall
performance of Cardno as well as the individual’s level of skill, contribution and experience. The
Committee also considers input and recommendations from the Managing Director on the
remuneration and performance of each of the key management personnel. In addition Ernst &
Young provided comparator analyses and independent advice to assist the Committee’s
assessment that key management personnel remuneration remains competitive in the market place.
b) Short-Term Incentive (STI)
STI is an at risk annual incentive payment provided in the form of cash. The STI is potentially
available to key management personnel and other senior staff who have significant influence over
the annual financial outcomes of the business and who are able to meet key divisional and personal
objectives.
STI is assessed over the duration of Cardno's financial year, and consists of cash payments to key
management personnel, with 50% of any award being deferred and paid 12 months after
achievement. At least 60% of the potential incentive payment for at target performance for key
management personnel is assessed on key performance indicators (KPIs) based on financial
measures for the Cardno group overall and for the key management personnel’s divisional financial
performance (where relevant). The remaining incentive component is assessed on relevant KPIs
based on specific non-financial parameters including safety, business growth, client relationships
and working capital reduction. The principal financial performance objectives are based on results
compared to budgeted financial outcomes. The non-financial objectives vary and are specific to
position, responsibility and areas assessed by the Managing Director to be integral to each area of
accountability.
Key management personnel can earn between 20% and 50% of their FAR (depending on position)
for achieving at-target performance outcomes. In addition, key management personnel can achieve
additional STI up to 10% of their FAR, for out-performance results through achievement of
exceptional financial results and attainment of selected critical personal performance targets. This
payment is based on the Managing Director’s and the Remuneration Committee’s assessment and
judgment of performance, measured against the key management person’s out-performance
against specific goals.
Page 10 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
The Board considers that the STI is an appropriate incentive designed to place a component of key
management personnel remuneration at risk against meeting or exceeding both financial and
non-financial targets.
Each year the Remuneration Committee reviews the proposed KPIs for the Managing Director and
key management personnel, which are submitted to the Board for approval.
At the end of the financial year, the Remuneration Committee assesses the actual performance of
Cardno and with input by the Managing Director the relevant division and the individual’s
performance against the KPIs set for the year. The Committee makes recommendations to the
Board which approves the STI to be paid to the Managing Director, key management personnel and
senior managers. This method of assessment and review provides the Committee with an objective
assessment of individual performance.
The contracts for the Managing Director and Chief Financial Officer include payment of assessed
STI without any deferral.
c) Long-Term Incentive (LTI)
The purpose of the LTI is to promote the alignment of the Managing Director and key management
personnel decision making with the interests of shareholders, including the achievement of
performance conditions which are likely to underpin sustainable long term business growth for
Cardno. The delivery of LTI is made under the PEP.
Vesting of LTI is assessed against Cardno's 3 year historical financial results, based on both the
compound annual growth in Cardno's earnings per share (EPS) (up to 50% potential) and the
relative TSR achieved by Cardno compared with an ASX-listed comparator group (up to 50%
potential). The LTI award for key management personnel under the PEP is paid in Performance
Rights, which may vest after 3 years from the date of issue, dependent on continuing employment
and the achievement of performance outcomes over that period.
This incentive is designed to ensure that any achievement by key management personnel is as a
result of both stretching growth in Cardno's EPS, as well as aligning key management personnel
rewards with shareholder returns. The Board exercises its discretion annually in inviting key
management personnel to participate in the 3 year PEP. The LTI Plan has also included payment for
other senior staff using Performance Options and Performance Rights.
In FY2013 it has been determined to discontinue the grant of Performance Options as an LTI. The
Board considers the issue of Performance Rights with vesting based on the achievements of
specific EPS and TSR outcomes, aligns the performance of key management personnel and other
senior staff with the interests of shareholders.
Equity Plans
Cardno has two equity plans for staff as follows:
a) Performance Equity Plan (PEP)
The PEP incorporates the LTI and is designed to reward strong performance by staff within
Cardno. Both Performance Options and Performance Rights to acquire ordinary shares in the
Company were approved by shareholders in accordance with the PEP at the 2009 AGM. This
approval followed an independent review of the executive LTI plan by Godfrey Remuneration who
provided some remuneration advice to the Company at the time. Proposed amendments were
adopted by the Board to ensure the interests and objectives of the shareholders, the Managing
Directors, key management personnel and staff were aligned.
The Plan rules prohibit participants entering into any transaction designed to remove the at risk
aspect of an instrument before it vests.
Page 11 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Performance Options
The grant of Performance Options is discretionary and is generally limited to managers and staff
who have been high performers throughout the year.
The plan operates by granting a Performance Option to managers and staff to purchase a
prescribed number of shares at a pre-determined time in the future. During the 2012 financial year,
Performance Options with a grant date fair value of $3,103,110 were issued with a vesting period
of three years from the grant date.
Each Performance Option is convertible to one ordinary share. The exercise price of the
Performance Options, determined in accordance with the rules of the plan, is based on the
weighted average price of the Company’s shares traded during the five days preceding the date of
offering the Performance Option. All Performance Options expire on the earlier of their expiry date
or termination of the manager or staff member’s employment. The Performance Options may be
exercised at any time during a 12 month period commencing three years after the date the
Performance Options are issued.
There are no voting or dividend rights attached to the Performance Options. Voting rights and
dividends will be attached to the unissued ordinary shares when the Performance Options have
been exercised.
Movements in Performance Options during the Year:
Grant Date
Vesting
Date
Expiry Date
5 December
2008
2 December
2009
29 November
2011
5 December
2011
2 December
2012
2 December
2013
25 November
2010
25 November
2013
25 November
2014
1 November
2011
1 November
2014
1 November
2015
Weighted average exercise price
Weighted average remaining contract life
Exercise
Price
$
Fair
Value
at
Grant
Date
$
Number of
Performance
Options at
Beginning of
Year
3.35
0.41
2,001,000
4.43
0.77
2,038,700
4.84
0.77
3,274,500
Performance
Options
Granted
Performance
Options
Lapsed
Performance
Options
Exercised
Number of
Performance
Options as at
30 June
2012
-
-
-
82,750
1,918,250
-
-
-
-
-
-
-
2,038,700
3,274,500
3,831,000
4.92
951 days
5.26
0.81
-
3,831,000
4.32
5.26
3.35
3.35
Total expense recognised $1,410,871 (2011: $1,681,706)
The Performance Options outstanding at 30 June 2012 have not vested, are not exercisable at
30 June 2012 and have an exercise price in the range of $4.43 to $5.26.
The Performance Options issued prior to FY2010 are subject to a performance hurdle and will not
vest unless there has been at least a compounded 5% improvement per year in the EPS of the
Company over the vesting periods.
The Performance Options issued during and since FY2010 are subject to a performance hurdle and
to vest the Company must achieve EPS growth in accordance with the following scale:
EPS Growth Over 3 Years
<12.5% (<4% pa)
12.5% (4% pa)
>12.5% (4% pa) & <26% (8% pa)
26% (8% pa)
>26% (8% pa) & <40% (12% pa)
≥40% (12% pa)
% of Performance Options in
Tranche to Vest
0%
30%
Pro rata
70%
Pro rata
100%
Page 12 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
The fair values of Performance Options granted during the year has been calculated using the
Black-Scholes model, taking into account price volatility, risk free interest rates and the dividend
yield.
For FY2013 it has been decided to change the provision of LTI under the PEP to all eligible staff to
Performance Rights only and to discontinue the grant of Performance Options for this Plan. The
Board considers the issue of Performance Rights based on the achievement of specific EPS and
TSR targets better aligns the performance of key management personnel and those selected staff
who participate in the PEP with the interests and objectives of shareholders.
Performance Rights
The issue of Performance Rights is discretionary and for FY2012 and prior periods, was limited to
the Managing Director, key management personnel and other senior managers. The Board
approves the specific key management personnel and senior managers who are invited to
participate in the allocation of Performance Rights on an annual basis. For FY2013, it is proposed
that all eligible staff will be entitled to receive Performance Rights.
The plan operates by granting a Performance Right to the Managing Director, key management
personnel and senior managers to acquire an ordinary share at nil consideration at a predetermined
time in the future. During the 2012 financial year 627,500 Performance Rights with a grant date
fair value of $3,007,138 were issued with a vesting period of three years from the grant dates of
20 October 2011 and 1 November 2011.
Each Performance Right is convertible to one ordinary share. All Performance Rights expire on the
earlier of their expiry date or termination of employment unless the Board determines otherwise.
The Performance Rights may be exercised at any time during a one-year period commencing three
years after the date the Performance Rights are issued provided the performance hurdles have
been met.
There are no voting or dividend rights attached to the Performance Rights. Voting rights and
dividends will attach to the ordinary shares issued when the Performance Rights have vested and
been exercised.
Movements in Performance Rights during the Year:
Grant Date
Vesting Date
Expiry Date
Performance
Hurdle
Fair
Value
at
Grant
Date
$
Number of
Performance
Rights at
Beginning of
Year
Performance
Rights
Granted
Performance
Rights
Lapsed
Performance
Rights
Vested
Not
Exercised
Number of
Performance
Rights as at
30 June
2012
22 October
2009
22 October
2012
22 October
2013
2 December
2009
2 December
2012
2 December
2013
21 October
2010
21 October
2013
21 October
2014
25 November
2010
25 November
2013
25 November
2014
EPS Growth
3.96
TSR
3.19
EPS Growth
3.20
TSR
2.30
EPS Growth
3.78
TSR
2.71
EPS Growth
3.94
TSR
2.96
20 October
20 October
20 October
EPS Growth
4.21
2011
2014
2015
1 November
2011
1 November
2014
1 November
2015
TSR
2.81
EPS Growth
4.38
TSR
2.97
Total expense recognised $1,280,672 (2011: $609,182)
67,500
67,500
112,000
112,000
76,250
76,250
188,750
188,750
-
-
-
-
-
-
-
-
-
-
-
-
72,500
72,500
241,250
241,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
67,500
67,500
112,000
112,000
76,250
76,250
188,750
188,750
72,500
72,500
241,250
241,250
Page 13 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
The fair values of Performance Rights granted during the year with a TSR performance hurdle,
have been calculated using a Monte-Carlo simulation valuation model taking into account price
volatility, risk free interest rates and comparator company shareholder return performance.
A Black-Scholes model has been used to value the Performance Rights with an EPS performance
hurdle taking into account risk free interest rates and the dividend yield.
The Performance Rights outstanding at 30 June 2012 have not vested, are not exercisable at
30 June 2012 and have no exercise price.
The Performance Rights are subject to performance hurdles of TSR (Tranche 1: 50%) and EPS
growth (Tranche 2: 50%) in accordance with the following scale:
TSR of Cardno Relative to
TSRs of Companies in
Comparator Group
Over 3 Years
<50th percentile
50th percentile
>50th & <75th percentiles
75th percentile and above
% of Performance Rights
to Vest
(Tranche 1 50%)
EPS Growth Over 3 Years
% of Performance Rights to
Vest
(Tranche 2 50%)
0%
50%
Pro rata
100%
<12.5% (<4% pa)
12.5% (4% pa)
>12.5% (4% pa) & <26%
(8% pa)
26% (8% pa)
>26% (8% pa) & <40% (12%
pa)
≥40% (12% pa)
0%
30%
Pro rata
70%
Pro rata
100%
Cardno’s TSR is ranked against the TSR performance of a comparator group defined as the
smallest companies in the S&P/ASX 300 excluding companies in the resources and financial
sectors dated at 1 July 2009.
b) Employee Share Acquisition Plan (ESAP)
Shares are issued to all qualifying staff under the ESAP (excluding Cardno Limited Directors), in
accordance with thresholds approved by Cardno shareholders at the 2009 AGM. It provides staff
with the opportunity to acquire shares in the Company for no consideration as a bonus component
of their remuneration. Staff with 12 months service or more, who have worked an average of 100
hours or more per month are entitled to $1,000 of shares each year and staff with 6 to 12 months
service are entitled to $500 of shares each year. Staff who work part time, who have greater
than 12 months service and who have worked more than 600 hours per year are also entitled to
$500 of shares each year. Shares issued under ESAP rank equally with other fully paid ordinary
shares from the date of issue.
Subject to the Board’s discretion and depending on the overall performance of Cardno, shares are
issued in the name of the participating staff member and are subject to a restriction period. The
shares are restricted under the plan until the earlier of three years from the date of acquisition or
the date at which the individual ceases to be a member of staff. Once the restriction period is
lifted the shares can be traded as fully paid ordinary shares. The ESAP has no conditions that
could result in the recipient forfeiting ownership of shares.
The number of shares still under a restriction period at 30 June 2012 are detailed in the table
below:
Grant Date
Issue Price
Restriction
Lifted FY2012
Restricted at 30
June 2012
Restriction Period
Ends
9 March 2010
25 February 2011
31 January 2012
$4.07
$6.05
$5.78
145,249
74,004
25,959
289,683
9 March 2013
314,932 25 February 2014
487,552 31 January 2015
Page 14 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Shares issued during the reporting period are valued at the volume weighted average market price
over the 5 trading days prior to the date of the issue to staff, which approximates the fair value.
Employment Agreements
a) Managing Director Remuneration Structure
Mr Andrew Buckley’s employment contract has no fixed term and provides both fixed and
incentive based remuneration which includes STI and LTI.
The basis of Mr Buckley’s fixed and variable remuneration is benchmarked against market
comparator group companies that are within half to double of Cardno’s average market
capitalisation and also against companies of similar organisational size operating within a similar
industry group.
Mr Buckley’s FAR was $750,000 for FY12.
STIs are assessed against two separate performance measures.
The first measure is an agreed target level profitability for Cardno. For FY12 an STI cash bonus of
between 50% and 100% of up to $700,000 was payable for achievement of between 95% and
105% of the agreed target level Group NPAT pro-rata between the qualification levels.
The second STI measure is a qualitative assessment of Mr Buckley’s performance against specific
criteria including financial growth, leadership, succession planning and critical relationships and
takes into account the prevailing operating and economic conditions. A maximum of $200,000
was payable under this measure for FY12.
The Board has discretion based on the recommendation of the Remuneration Committee, to
award up to an additional $200,000 for exceptional performance in the achievement of Group
NPAT outcomes, business growth, his personal leadership and relative performance compared to
other Chief Executive Officers in comparable companies.
LTI entitlements are awarded at the discretion of the Board on the recommendation of the
Remuneration Committee based on the overall performance and growth of Cardno, EPS growth
and relative TSR performance as well as other qualitative and quantitative measures of Cardno’s
longer term performance.
Mr Buckley’s LTI entitlement includes the issue of Performance Rights pursuant to Cardno’s
Performance Equity Plan approved by shareholders at the 2009 AGM. The quantum of 80,000
Performance Rights was approved by shareholders at the 2011 AGM.
Details of termination benefits payable by way of cash or Performance Rights to Mr Buckley are
outlined in the following table:
Benefits Payable
Mode of
retirement from
office
Notice
period
Unpaid /
accrued
FAR
Accrued but
untaken
annual
leave
Long
service
leave
12
months
12
months
Yes
Yes
Yes
Yes
Yes
Yes
Unpaid
/Accrued
STI
Yes, at
Board’s
discretion
Yes, at
Board’s
discretion
Severance
payment
Unvested
Performance
No
No
Rights
At Board’s
discretion
At Board’s
discretion
Notice by
Mr Buckley
Termination by
the Company
(except for
misconduct)
Termination by
the Company for
misconduct
Nil
Nil
Yes
Yes
No
No
No
Page 15 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
b) Key Management Personnel Employment Agreements
Each agreement varies according to the individual key management person but typically includes:
a)
b)
c)
Termination provisions relating to notice periods and payments similar to those outlined for
the Managing Director above, except that notice periods are up to six months and reduced
where termination is for performance reasons.
Performance and confidentiality obligations on the part of both the employer and employee,
Employee covenants that during the term of employment and for at least six months after
termination the employee will not solicit any existing client or employee of the Company.
Non-Executive Directors
Non-Executive Directors remuneration is reviewed annually by the Board. The review takes account of
recommendations of the Remuneration Committee and external benchmarking of comparable
companies. In considering the level of remuneration for Non-Executive Directors, the Remuneration
Committee uses independent external advice, industry survey data and other information about the
level of fees and benefits being paid to Non-Executive Directors within comparator companies. The
Board took independent advice in 2012 from Ernst & Young regarding Non-Executive Directors’
remuneration.
Non-Executive Directors of Cardno Limited are entitled to a fee that is determined by the Board on
commencement of the role and reviewed on an annual basis thereafter. The fee includes compulsory
superannuation contributions. Non-Executive Directors do not participate in equity plans of the
Company and do not receive retirement benefits. Cardno targets to set Non-Executive Director fees at
approximately the median of Non-Executive Director fees in the comparator group.
The aggregate fee pool for all of the Non-Executive Directors was approved by shareholders at the
2011 AGM with a maximum aggregate of $900,000 including superannuation. The reasons for
requesting an increase at that time were as follows:
a)
b)
c)
d)
e)
f)
The previous limit of $600,000 was approved by shareholders on 25 October 2007.
At the time of the 2011 AGM the Board consisted of three Executive Directors and four Non-
Executive Directors. It had been decided to continue transitioning the Board’s composition to
a greater membership of Non-Executive Directors who will be compensated under the
aggregate fee pool increase.
The recommendation was based on an independent external review of competitive board
remuneration practices for similar companies.
The Board was of the view that the proposed increase to Non-Executive Directors aggregate
remuneration was commensurate with market remuneration paid to Non-Executive Directors
at equivalent ASX listed companies in terms of growth and market capitalisation, and was
necessary to retain and attract appropriately qualified Non-Executive Directors to the
Company.
The increase reflected the more onerous corporate governance environment and the
commensurate increase in time and responsibility of Non-Executive Directors for Board
activities.
The Company did not intend to allocate the full amount immediately. The proposed increase
was to allow for growth over time in both the remuneration and the number of Non-Executive
Directors.
Page 16 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
The FY12 Non-Executive Director fee structure, last increased in July 2010, is outlined below:
Chairman of the Board: $200,000 (covering all responsibilities as Chairman of the Board and
member of any Board Committee).
Other Non-Executive Directors: $100,000 (covers all responsibilities as a member of the
Board, including other Committee memberships and other duties including representing the
Company externally).
As a consequence of Cardno’s growth, the benchmarking of Non-Executive Directors fees compared
with companies in the market comparator group, the increasing time commitment and demands on
Directors and the need to plan for Non-Executive Director succession, the Board determined to
restructure the manner in which Non–Executive Directors are remunerated for the financial year 2013.
The new fee structure for Non-Executive Directors from 1 July 2012 includes payment of a base Board
fee and Committee fees as follows:
Chairman of the Board: $250,000 (covering all responsibilities as Chairman of the Board and
Chairman and/or member of any Board Committee)
Other Non-Executive Directors: $100,000 (covering responsibilities as a member of the Board
and other duties including representing the Company externally)
Committee Chairman: $20,000, and Committee member: $10,000
(covering all
responsibilities as either chairman or member respectively of the Audit, Risk & Compliance
Committee and of the Remuneration Committee).
No fees are payable to either the Chairman or a member of the Nominations Committee
It is not proposed to seek an increase to the aggregate fee pool for Non-Executive Directors at the
2012 AGM.
The remuneration of the Directors and key management personnel are set out in the following tables.
Page 17 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Director and Key Management Personnel Remuneration
Details of the nature and amount of each major element of remuneration of each Director of the Company and other Key Management Personnel of the
consolidated entity are:
Short Term
Post
Employment
Long Term
Share Based Payments
Salary and
Fees
STI *
$
$
Non-
Monetary
Benefits
$
Total
$
Super-
annuation
Benefits
$
Other Long
Term
Benefits***
$
Termina-
tion
Benefits
$
Shares
Performance
Rights**
$
$
Director
Non-Executive
John Massey
Anthony Barnes
Peter Cosgrove
Ian Johnston
John Marlay
Tonianne Dwyer
Executive
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Former
Graham Tamblyn
(resigned 21/10/2010)
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
183,486
183,486
50,636
49,464
91,743
91,743
91,743
91,743
53,517
-
1,923
-
700,480
641,137
377,697
341,193
353,585
341,919
-
100,083
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
183,486
183,486
50,636
49,464
91,743
91,743
91,743
91,743
53,517
-
1,923
-
1,060,000
810,000
120,400
105,000
69,200
50,000
4,000 1,764,480
4,000 1,455,137
502,097
4,000
450,193
4,000
426,785
4,000
395,919
4,000
16,514
16,514
49,364
50,536
8,257
8,257
8,257
8,257
4,816
-
173
-
50,448
103,725
38,303
53,807
44,278
43,006
-
-
-
-
-
-
-
-
-
-
-
-
-
329,981
-
91,066
-
92,099
-
20,000
-
4,000
-
124,083
-
14,033
-
79,076
Total
$
200,000
200,000
100,000
100,000
100,000
100,000
100,000
100,000
58,333
-
2,096
-
-
-
-
-
-
-
-
-
-
-
-
-
252,616
89,488
122,136
44,252
100,693
35,321
2,067,544
1,978,331
662,536
639,318
571,756
566,345
-
27,372
-
244,564
475,445
3,862,265
196,433
3,928,558
Proportion of
Remuneration
Performance
Related
Value of
Performance
Rights as a
Proportion of
Remuneration
-
-
-
-
-
-
-
-
-
-
-
-
63.5%
62.1%
36.6%
37.6%
29.7%
31.3%
-
51.7%
44.7%
45.1%
-
-
-
-
-
-
-
-
-
-
-
-
12.2%
4.5%
18.4%
6.9%
17.6%
6.2%
-
11.2%
12.3%
5.0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total Compensation – 2012
Total Compensation – 2011
1,904,810
1,249,600
1,840,768
985,000
12,000 3,166,410
220,410
-
16,000 2,840,768
298,135
592,222
* STIs which have been accrued at 30/06/2012 and to be paid in 2nd quarter FY2013.
** The amount included in remuneration is the grant date fair value which has been recognised in accordance with accounting standards over the expected vesting period.
*** Amounts earned under the Transitional Long Term Incentive plan (TLTI) no longer applicable in FY2012 and replaced by the LTI plan.
Page 18 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Director and Key Management Personnel Remuneration continued
Short-Term
Post
Employment
Long
Term
Share Based Payments
Executives
Salary
STI*
Paul Gardiner
Jean–Francois Floury
Executives
Roger Collins-Woolcock 2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
Ross Thompson
(effective 1/7/11)
Michael Renshaw
Kylie Sprott
$
424,463
363,699
376,438
111,688
401,802
367,761
493,598
418,213
279,479
244,754
280,997
220,183
Total compensation – 2012
2,256,777
$
88,862
85,000
93,233
25,000
107,750
60,000
184,500
120,000
70,200
65,000
79,650
65,000
624,195
Total compensation – 2011
1,726,298
420,000
Non-
Monetary
Benefits
Total
Super-
annuation
Benefits
$
$
$
Other
Long
Term
Benefits
$
Shares
Termina-
tion
Benefits
$
$
Performance
Options &
Performance
Rights**
$
4,000
4,000
-
-
4,000
4,000
-
-
-
-
-
-
8,000
8,000
517,325
452,699
469,671
136,688
513,552
431,761
678,098
538,213
349,679
309,754
360,647
285,183
23,700
36,531
25,000
10,052
22,080
33,009
19,939
-
19,874
22,608
20,366
22,179
2,888,972
2,154,298
130,959
124,379
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000
1,000
1,000
-
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
6,000
5,000
117,856
45,508
28,929
-
118,447
48,244
126,121
45,508
63,879
14,946
52,591
10,599
507,823
3,533,755
164,805
2,448,482
Total
$
659,881
535,738
524,600
146,740
655,079
514,014
825,158
584,721
434,433
348,308
434,604
318,961
Proportion of
Remuneration
Performance
Related
Value of
Performance
Options &
Performance
Rights as a
Proportion of
Remuneration
31.3%
24.4%
23.3%
17.0%
34.5%
21.1%
37.6%
28.3%
30.9%
23.0%
30.4%
23.7%
32.0%
23.9%
17.9%
8.5%
5.5%
0.0%
18.1%
9.4%
15.3%
7.8%
14.7%
4.3%
12.1%
3.3%
14.4%
6.7%
* STIs which have been accrued but not paid based on estimates of achievement of performance targets.
** The amount included in remuneration is the grant date fair value which has been recognised in accordance with accounting standards over the expected vesting period.
Additional Information
Name
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
STI
Vested%
Forfeited %
96%
86%
87.0%
59%
78%
72%
90%
78%
89%
4%
14%
13%
41%
22%
28%
10%
22%
11%
Page 19 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Consequences of Performance on Shareholder Wealth
Cardno’s financial performance and resultant benefits for shareholder return are demonstrated in the
following table. The Remuneration Committee has taken these results into consideration when making
recommendations to the Board for the Managing Director and other key management personnel in
respect of the current financial year and the previous four financial years.
Net Profit After Tax (000’s)
Dividends Paid or Provided (000’s)
Change in Share Price – year on
year ($ per share)
Basic Earnings Per Share Growth
Return on Capital Employed
2012
2011
2010
2009
2008
$74,168
$43,488
$2.18
9.7%
20.5%
$58,802
$33,975
$1.49
28.3%
24.9%
$37,597
$23,955
$0.53
0.1%
17.3%
$34,154
$21,434
-$1.06
4.3%
19.0%
$27,452
$16,349
-$2.69
12.6%
25.8%
Over the past four years, Cardno’s profit after income tax has grown at an average rate per annum of
28% and revenue from $399 million (2008) to $966 million (2012). During the same period average
key management personnel total remuneration has grown by approximately 17% per annum.
Performance Rights for the Managing Director and Key Management Personnel
Details of vesting profiles of Performance Rights granted as remuneration to the Executive Directors
and key management personnel of Cardno and still outstanding at 30 June 2012, including
Performance Rights granted during the financial year are as follows:
Key Management
Personnel
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
Outstanding
Performance
Rights
Grant Date
Vesting Date
% Vested in
Year
% Forfeited in
Year
80,000
70,000
60,000
35,000
35,000
30,000
30,000
27,500
25,000
40,000
35,000
30,000
35,000
40,000
35,000
30,000
50,000
35,000
30,000
30,000
25,000
8,000
30,000
25,000
20-Oct-11
21-Oct-10
22-Oct-09
20-Oct-11
21-Oct-10
22-Oct-09
20-Oct-11
21-Oct-10
22-Oct-09
1-Nov-11
25-Nov-10
2-Dec-09
1-Nov-11
1-Nov-11
25-Nov-10
2-Dec-09
1-Nov-11
25-Nov-10
2-Dec-09
1-Nov-11
25-Nov-10
2-Dec-09
1-Nov-11
25-Nov-10
20-Oct-14
21-Oct-13
22-Oct-12
20-Oct-14
21-Oct-13
22-Oct-12
20-Oct-14
21-Oct-13
22-Oct-12
1-Nov-14
25-Nov-13
2-Dec-12
1-Nov-14
1-Nov-14
25-Nov-13
2-Dec-12
1-Nov-14
25-Nov-13
2-Dec-12
1-Nov-14
25-Nov-13
2-Dec-12
1-Nov-14
25-Nov-13
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Non-Executive Directors do not participate in any of the Company’s incentive plans.
Page 20 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
No Performance Rights granted during the financial year have vested. No Performance Rights have
been granted since the end of the financial year and up to the date of this report. No Performance
Rights were exercised during the financial year. Details of the performance criteria are included on
page 14.
During the reporting period, the following shares were issued on the exercise of Performance Options
previously granted as compensation:
Key Management Personnel
Number of shares
Amount paid $/share
Roger Collins-Woolcock
Paul Gardiner
Michael Renshaw
60,000
70,000
60,000
$3.35
$3.35
$3.35
The movement during the reporting period, by value, of Performance Rights and Performance Options
over ordinary shares in Cardno Limited held, directly, indirectly or beneficially, by each key
management person, including their related parties, is as follows:
Executive Directors and Key
Management Personnel
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Key Management Personnel
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
Granted in year
$ (a)
Exercised in
year $ (b)
(Performance
Rights)
(Performance
Options)
Vested in year $
(not exercised)
372,000
162,750
139,500
193,400
169,225
193,400
241,750
145,050
145,050
-
-
-
117,600
-
137,200
117,600
-
-
-
-
-
-
-
-
-
-
-
(a) The value of Performance Rights granted in the year is the fair value of the Performance Rights
calculated at grant date using the Monte-Carlo & Black-Scholes pricing models. The total value of
the Performance Rights is allocated to remuneration over the vesting period (i.e. in years 20
October 2011 – 20 October 2014 and 1 November 2011 – 1 November 2014).
(b) The value of Performance Options exercised during the year is calculated as the market price of
the shares of the Company as at closing of trading on the date the Performance Options were
exercised after deducting the price to exercise the option.
12. Directors’ and Executives’ Interests
As at the date of this report, the interests of the Directors in the shares of Cardno Limited were:
Cardno Limited
Ordinary Shares
Shares held in
Escrow
Performance Options
Performance Rights
Anthony Barnes
Andrew Buckley
Peter Cosgrove
Tonianne Dwyer
Jeffrey Forbes
Trevor Johnson
Ian Johnston
John Massey
John Marlay
5,084
2,520,261
979
-
31,237
1,600,001
268,839
64,816
3,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
210,000
-
-
100,000
82,500
-
-
-
Page 21 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
The movement during the reporting period in the number of ordinary shares in Cardno Limited held,
directly, indirectly or beneficially, by each key management person, including their related parties, is as
follows:
Held at 1 July
2011
Purchases
Received as
Compensation
Sales
Held at 30 June
2012
Non–Executive Directors
Anthony Barnes
Peter Cosgrove
Tonianne Dwyer
Ian Johnston
John Marlay
John Massey
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
4,307
-
-
241,955
-
58,334
2,450,261
26,466
2,050,001
704,103
-
850,939
191,286
5,165
430
777
979
-
26,884
3,500
6,482
70,000
4,771
50,000
214,922
-
120,346
60,000
887
10,834
-
-
-
-
-
-
-
-
-
173
86
173
173
173
173
-
-
-
-
-
-
-
-
(500,000)
(170,000)
-
-
-
-
-
5,084
979
-
268,839
3,500
64,816
2,520,261
31,237
1,600,001
749,198
86
971,458
251,459
6,225
11,437
13. Unissued shares under Performance Options and Performance Rights
At the date of this report unissued ordinary shares of the Company under Performance Options are:
Exercise Date
Expiry date
Exercise price
2 December 2012
2 December 2013
25 November 2013
25 November 2014
1 November 2014
1 November 2015
$4.43
$4.84
$5.26
Number of
Performance Options
2,038,700
3,274,500
3,831,000
At the date of this report unissued ordinary shares of the Company in relation to Performance Rights
are:
Exercise Date
Expiry date
Exercise price
Number of
Performance Rights
22 October 2012
22 October 2013
2 December 2012
2 December 2013
21 October 2013
21 October 2014
25 November 2013
25 November 2014
20 October 2014
20 October 2015
1 November 2014
1 November 2015
Nil
Nil
Nil
Nil
Nil
Nil
135,000
224,000
152,500
377,500
145,000
482,500
These Performance Options and Performance Rights do not entitle the holder to participate in any share
issue of the Company.
14. Non-Audit Services
During the year KPMG, the Company’s auditor, has performed certain other services in addition to their
statutory duties.
The Board has considered the non-audit services provided during the year by the auditor and in
accordance with written advice provided by resolution of the Audit, Risk and Compliance Committee, is
satisfied that the provision of those non-audit services during the year by the auditor is compatible
Page 22 of 86
Directors’ Report
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
with, and did not compromise, the auditor independence requirements of the Corporations Act 2001
for the following reasons:
All non-audit services were subject to the corporate governance procedures adopted by the
Board and have been reviewed by the Audit, Risk and Compliance Committee to ensure they do
not impact the integrity and objectivity of the auditor; and
The non-audit services provided do not undermine the general principles relating to auditor
independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did
not involve reviewing or auditing the auditor’s own work, acting in a management or decision
making capacity for Cardno, acting as an advocate for Cardno or jointly sharing risks and
rewards.
Details of the amounts paid to the auditor and its related practices for audit and non-audit services
provided during the year are set out in note 30.
15. Lead Auditor’s Independence Declaration Under Section 307C of the Corporations Act 2001
The lead auditor’s independence declaration is set out on page 24 and forms part of the Directors’
report for the year ended 30 June 2012.
16. Rounding of Amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and
Investments Commission, relating to the ‘rounding off’ of amounts in the Directors’ report and financial
statements. Amounts in the Directors’ report and financial report have been rounded off in accordance
with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Signed in accordance with a resolution of Directors.
On behalf of the Directors
JOHN C MASSEY
Chairman
Brisbane
13 August 2012
Page 23 of 86
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the Corporations
Act 2001
To: the directors of Cardno Limited
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2012 there have been:
• no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
• no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Robert S Jones
Partner
Brisbane
13 August 2012
Page 24 of 86
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
Corporate Governance Statement
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
The Board of Directors of Cardno Limited is ultimately responsible for all corporate governance matters
of the consolidated entity and is accountable to the shareholders for the overall business performance
of the company. Details of the corporate governance policies of the company can be found in the
Investor Centre of the Cardno website, www.cardno.com.au.
Cardno Limited is committed to implementing and maintaining sound corporate governance practices
and has considered the ASX Corporate Governance Principles and Recommendations (Second Edition)
in the development of its corporate governance. The Board has assessed Cardno’s current practice
against these Principles and Recommendations and notes that Cardno’s practices are consistent except
where stated below.
Principle 1: Lay solid foundation for management and oversight
The role of the Board and delegation to the Managing Director and the senior management team has
been formalised. The most significant responsibilities of the Board are:
providing strategic guidance to Cardno including contributing to the development of and
approving the corporate strategy;
reviewing and approving business plans, the annual budget and financial plans including available
resources and major capital expenditure initiatives;
reviewing the operational and financial performance of Cardno’s activities;
reporting to shareholders and the market;
ensuring compliance with prudential regulations and standards;
ensuring adequate risk management processes are in place;
reviewing internal controls and internal and external audit reports;
monitoring and influencing the culture and reputation of Cardno;
monitoring Board composition, Director selection and Board process and performance;
approving key executive appointments and ensuring executive succession planning;
reviewing the performance and remuneration of the Managing Director and senior management;
ensuring that the Board as a whole has an appropriate understanding of each substantial segment
of the business; and
authorising and monitoring major investment and strategic commitments.
The Board has delegated to the Managing Director, together with his senior management team the
responsibility for implementation of Cardno’s strategic direction, business plans and day-to-day
management of its operations.
The performance of the Managing Director and senior management team is evaluated by the Board
through formal performance reviews undertaken on an annual basis. The individual performance of the
Managing Director and each member of the senior management team is reviewed against goals set in
the previous year and new objectives are established for the following financial year. Performance
reviews were completed during the year in accordance with the process agreed by the Board.
The Board endorses a culture of continuous improvement and will therefore continue to refine and
develop its role and the delegation of responsibilities as Cardno develops.
The Board’s responsibilities and functions are also contained in Cardno’s Corporate Governance Policy
which can be accessed in the Investor Centre on the Cardno website.
Principle 2: Structure the Board to add value
The Board has been established so that it has appropriate composition, size and commitment to
adequately discharge its responsibilities and duties. Collectively the Directors have a broad range of
experience, expertise, skills, qualifications and contacts relevant to the business. Details of the skills
and experience of each Director are contained in the Directors’ Report and on the company’s website.
Page 25 of 86
Corporate Governance Statement
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
The Board currently comprises six Non-Executive Directors including the Chairman, and three Executive
Directors. In June this year Mr Massey announced he would retire as Chairman of the Board effective
14 August 2012. Mr John Marlay will take over as Chairman at that time. Mr Massey has advised that
he will not seek re-election as a Director at the 2012 Annual General Meeting.
The Board has adopted the following criteria to determine the independence of a Director as someone
who must be a Non-Executive Director and:
is not a substantial shareholder of Cardno or an officer of, or otherwise associated directly
with, a substantial shareholder of Cardno;
within the last three years has not been employed in an executive capacity by Cardno or
another group member, or been a Director after ceasing to hold any such employment;
within the last three years has not been a principal of a material professional adviser or a
material consultant to Cardno or another group member or an employee materially associated
with the service provided;
is not a material supplier or customer of Cardno or another group member, or an officer of or
otherwise associated directly or indirectly with a material supplier or customer;
has no material contractual relationship with Cardno or other group member other than as a
Director of the company;
has not served on the Board for a period which could, or could reasonably be perceived to,
materially interfere with the Director’s ability to act in the best interests of Cardno; and
is free from any interest and any business or other relationship which could, or could
reasonably be perceived to, materially interfere with the Director’s ability to act in the best
interests of Cardno.
The Board has confirmed that based on this definition of independence, Mr Massey, Mr Marlay,
Mr Johnston, General Cosgrove, Ms Dwyer and Mr Barnes are independent Non-Executive Directors.
The Board noted Mr Johnston’s former role as a Director of RBS Morgans, which ended some years
ago, and determined that Mr Johnston now meets the Board’s definition of independence. The Board
considers that Mr Johnston’s current non-financial involvement with RBS Morgans does not interfere
with his ability to act independently in the interests of Cardno.
The Board currently considers appropriate to have a number of Executive Directors on the Board as
they have a strong awareness of management issues and a deep knowledge of Cardno. Cardno has
reduced the number of Executive Directors and increased the number of Non-Executive Directors over
recent years to the point where it now has a majority of Non-Executive Directors.
The role of the Chairman and Chief Executive Officer are separate. The Chairman of the Board is
Mr Marlay who is an independent Non-Executive Director. The Chief Executive Officer and Managing
Director is Mr Buckley.
Each Director, as part of their agreement with Cardno, has the ability to seek independent advice at
Cardno’s expense after consultation with the Chairman.
The Nominations Committee comprises three Non-Executive Directors, Mr Marlay (Chairman),
General Cosgrove, Mr Johnston and the Managing Director Mr Buckley. Details of the number of
meetings of the Committee and members’ attendance can be found in the Directors’ Report.
The Nominations Committee facilitates Board and individual Director performance reviews and
evaluation on at least an annual basis using an external facilitator as necessary to ensure independent
professional scrutiny and benchmarking against developing best practices. The results of the review are
presented to the Chairman and to the Board. The Board acknowledges that performance can always be
enhanced and will continue to seek and consider ways of further enhancing performance both
individually and collectively.
Page 26 of 86
Corporate Governance Statement
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
The Nominations Committee assists the Board in determining the composition of the Board and its
committees. When considering a candidate as a Director, consideration is given to the candidate’s
ability to act in the best interests of shareholders as well as specific skills and expertise. Consideration
is also given to the candidate’s capacity to understand the impacts of various laws and regulations on
their role and on Cardno including company law, trade practices legislation, environmental law,
occupational health and safety, equal opportunity and taxation.
As Cardno has significant operations outside of Australia, consideration is also given to the candidate’s
ability to understand the impacts of foreign jurisdiction legislation, foreign currency issues and the
business environment in the countries in which Cardno operates. In addition, consideration is given to
the candidate’s knowledge of the areas of Cardno’s operations, risk management concepts and how
they apply to Cardno and also whether the candidate is up to date with issues of corporate
governance.
New Directors undergo an induction process in which they are given an extensive briefing on Cardno.
This includes meetings with key executives, tours of the relevant businesses, an induction package and
presentations. A formal letter of appointment is provided.
In order to achieve continuing improvement in Board performance, all Directors are encouraged to
undergo continuing professional development. Specifically, Directors are provided with the resources
and training to address skills gaps where they are identified.
The Nominations Committee has responsibility for independently supervising Cardno’s Leadership
Development Programme as part of its succession considerations. The Committee also proposes the
development of policies relevant to Cardno’s human resources, including the Diversity Policy.
The roles and responsibilities of the Nominations Committee are set out in its Terms of Reference
which are displayed on the Investor Centre of Cardno’s website.
Principle 3: Promote ethical and responsible decision making
The Board has adopted a Code of Conduct for Directors, senior managers and staff. The Code of
Conduct is regularly reviewed and updated as necessary to ensure it reflects the highest standards of
behaviour, professionalism and practices necessary to maintain confidence in the company’s integrity.
The code sets the standard of behaviour required in areas such as performance and conduct, health
and safety, use of property, compliance with laws and professional standards, confidentiality of
information and conflicts of interest.
The Board also promotes the maintenance of an open working environment in which all employees and
contractors are able to report instances of unethical, improper, unlawful or undesirable conduct without
fear of intimidation or reprisal. This is endorsed through the Whistleblowers Protection Policy and the
Whistleblower hotline which is managed by an independent operator and accessible to all Cardno staff
24 hours a day, 7 days a week. The Audit, Risk & Compliance Committee receives notifications and
reports of disclosures made under the policy. After due investigation, the Committee determines an
appropriate response and whether corrective action is required to be taken.
The Board has adopted a policy for trading in Cardno securities by Directors, senior managers and
staff. The purpose of this policy is to guide Directors and senior managers in the performance of their
activities and to define the circumstances in which both they and staff, and any associates, are
permitted to deal in securities. This policy was updated during 2012 and the updated version was
disclosed on the ASX in April 2012 in accordance with the ASX Listing Rules. The updated policy
addresses each of the ASX requirements including provisions relating to the prohibition of trading by
directors and senior executives in Cardno’s securities during defined blackout periods.
The codes and policy have been designed with a view to ensuring the highest ethical and professional
standards as well as compliance with legal obligations. Both the code and the policy are available for
review in the Investor Centre of the Cardno website.
Page 27 of 86
Corporate Governance Statement
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Diversity Policy
The Board has adopted a Diversity Policy which is accessible on the Cardno website.
Cardno respects and values the competitive advantage of diversity and recognises the benefits of its
integration throughout Cardno through the improvement of corporate performance and increasing
shareholder value. Specifically, diversity is reinforced through both strategic and operational means,
and by management nurturing and developing the collective relevant skills.
As at 30 June 2012, women comprised 31% of Cardno’s workforce globally. The proportion of
women in senior executive positions such as General Manager, Division Manager, Business Unit
Manager and/or Vice President was 11%. The proportion of women on the Cardno Board was 11%.
Cardno has established objectives with the aim of recognising and increasing diversity within the
organisation and the continued promotion of our people to senior and executive management roles,
regardless of gender, age or race.
As part of the implementation of the policy, measurable objectives have been developed to create
ongoing visibility and focus on diversity. As a rapidly growing organisation, Cardno’s first objective is
to ensure that it has accurate analytics regarding diversity. This will in turn help to refine the areas of
focus and effort.
During 2011/12, Cardno implemented a flexible work policy in the Australia/New Zealand region aimed
at promoting flexibility in work arrangements for all employees. In addition, Cardno University was
launched globally and will provide opportunities to create exciting and rewarding career paths for
Cardno staff.
In 2012/2013 Cardno aims to:
undertake a comprehensive review of the analytics of diversity within the organisation to
determine priority actions and programs. This will take place on both a region and global
perspective and will include data regarding job roles and salary levels.
identify and communicate emerging themes with regard to diversity relevant for Cardno’s
business and consequently establish further priorities and actions.
increase the percentage of women at all levels in the company, including on the Board, in
senior management and in professional roles.
develop a “Women in Cardno” network to champion gender equality globally.
implement a review of our recruitment practices with the aim of increasing our applicant
diversity, including indigenous people in the Australia and New Zealand region.
Principle 4: Safeguard integrity in financial reporting
The Chief Executive Officer and Managing Director and Chief Financial Officer have provided the Board
with a statement confirming that Cardno’s financial reports present a true and fair view of its financial
position and are in accordance with relevant accounting standards. During the year the Audit,
Risk & Compliance Committee consisted of two Non-Executive Directors, Mr Barnes and Mr Johnston,
and one Executive Director, Dr Johnson. In June 2012 Dr Johnson retired from the Committee and
was replaced by Ms Dwyer, an independent Non-Executive Director. Mr Barnes, an independent
Non-Executive Director, is Chairman of the Audit, Risk & Compliance Committee. Mr Barnes is not the
Chairman of the company.
The Audit, Risk & Compliance Committee requires the rotation at least every five years of the external
audit engagement partner. The selection of the external audit engagement partner is assessed against
specific criteria established and agreed by the Audit, Risk & Compliance Committee.
The role, objective and responsibilities of the Audit, Risk & Compliance Committee are set out in its
Terms of Reference which can be viewed in the Investor Centre of the company’s website.
Page 28 of 86
Corporate Governance Statement
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Principle 5: Make timely and balanced disclosure
Cardno has adopted a Continuous Disclosure Policy which can be viewed in the Investor Centre of the
company’s website. The purpose of this policy is to set out the procedures to be followed to enable
accurate, timely, clear and adequate disclosure to the market and compliance with the ASX Listing
Rules regarding disclosure.
The Policy also operates to ensure that all employees are aware of their obligations for compliance
within the continuous disclosure obligations. The Board regularly reviews the policy to ensure it reflects
best practice standards regarding disclosure and by following the policy ensures the market is kept
informed of price sensitive or significant information in accordance with the Listing Rules. The policy
was reviewed during the last financial year.
Cardno maintains a Confidential Information Policy which establishes standards of behaviour and
processes regarding the manner in which the executives and employees handle confidential information
relating to Cardno’s business. A copy of the policy has been distributed to all staff and is accessible
on the Cardno intranet.
The Company Secretary has been nominated as the person responsible for communications with the
Australian Securities Exchange (ASX). This role includes the responsibility for ensuring compliance with
the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating
information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.
Principle 6: Respect the rights of shareholders
The Board recognises the important rights of shareholders and strives to communicate with
shareholders regularly and clearly – both by electronic means and using more traditional communication
methods. Shareholders are encouraged to attend and participate at general meetings. Cardno’s
auditors attend the Annual General Meeting of the company and are available to answer shareholders’
questions.
The Board has adopted a Communications Policy that provides for:
communicating effectively with shareholders through releases to the market via the ASX, the
media, Cardno’s website, information mailed to shareholders and the general meetings of
Cardno;
posting all information disclosed to the ASX on the Cardno website when it is disclosed to the
ASX. Presentation material used in public presentations and to brief analysts is released to the
ASX and posted on Cardno’s website;
giving shareholders ready access to balanced and understandable information about Cardno and
corporate proposals; and
having the external auditor attend the Annual General Meeting and being available to answer
shareholder questions about the conduct of the audit and the preparation and content of the
Auditor’s Report.
A copy of Cardno’s Communications Policy is able to be reviewed in the Investor Centre of the Cardno
website.
Principle 7: Recognise and manage risk
The Board, together with the Managing Director and senior management, has sought to identify,
monitor and mitigate risk. Internal controls are monitored on a continuous basis and wherever
possible, improved. The issue of risk management is formalised in Cardno’s Corporate Governance
Policy and in the Audit, Risk & Compliance Committee Charter which are both kept under regular
review through the Board’s Audit, Risk & Compliance Committee which meets at least four times each
year, and at Board level. The Audit, Risk & Compliance Committee has approved policies and
Page 29 of 86
Corporate Governance Statement
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
procedures to identify and monitor business risks as well as adopting an internal compliance and
control system to manage material business risk.
The Operational Risk Management Committee, which is comprised of the Managing Director and Senior
Executives who represent all aspects of Cardno’s business across the globe, regularly reports to the
Audit, Risk & Compliance Committee. The Operational Risk Management Committee has responsibility
for oversight and maintenance of the Enterprise Wide Risk Management System, the company’s
Operational Risk Management Plan, which has been established in accordance with AS/NZ 4360:2004.
The Operational Risk Management Committee also has responsibility for operational risks, quality
control issues and operations processes.
The Audit, Risk & Compliance Committee reports to the Board regularly on the implementation and
management of the Enterprise Wide Risk Management System and identifies significant risks to Cardno
and how they are being mitigated and managed by management via the Operational Risk Management
Committee.
This structure allows Cardno to assess risks ranging from low to very high and it is those risks that are
identified as significant that are referred to in the Financial Report.
Cardno also monitors the quality and accuracy of its services through a Quality Management System.
The details of the Quality Management System are available to staff via the company’s intranet and
client feedback is a feature of the system.
The Managing Director and Chief Financial Officer attest to the Board the soundness of the risk
management and internal control systems each year and that the system is operating effectively in all
material aspects in relation to financial risks.
The objective, roles and responsibilities of the Audit, Risk & Compliance Committee and Operational
Risk Management Committee and each committee’s terms of reference are able to be accessed in the
Investor Centre of Cardno’s website. Details of the number of meetings of the Audit, Risk &
Compliance Committee and members’ attendance can be found in the Directors’ Report.
Principle 8: Remunerate fairly and responsibly
Cardno has established a Remuneration Committee. The Remuneration Committee, which advises and
reports to the Board, is chaired by Mr Johnston and includes Mr Marlay and Mr Barnes, all
Non-Executive Directors. In January 2012 Mr Massey, while remaining as a member, retired as
Chairman of the Committee and was replaced by Mr Marlay. In August 2012 when Mr Marlay became
Chairman of Cardno, he stepped down as Chairman of the Committee but remains a member of the
Committee. Details of the number of meetings of the committee and members’ attendance can be
found in the Directors’ Report. The current remuneration of the Directors and the Senior Executives is
published in the Directors’ Report.
The Board has consciously designed Cardno’s remuneration strategy to ensure its Managing Director
and senior management team are strongly aligned to achieving Cardno’s business strategies and deliver
shareholder value.
Cardno’s vision is to be a world leader in the provision of professional services to improve the physical
and social environment. This vision will be achieved through focussing on our people, clients, growth,
quality, safety and performance.
The Cardno group’s remuneration strategy is designed to attract, retain and motivate appropriately
qualified and experienced senior managers in the engineering and professional consulting services
sector. The ability of Cardno to deliver long term shareholder value relies significantly upon the
capability of these senior managers to drive business performance and client service satisfaction.
Page 30 of 86
Corporate Governance Statement
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Cardno’s remuneration strategy is provided through a framework which includes a mix of fixed and
variable remuneration, including short-term and long-term performance-based incentives (Total
Remuneration), designed to maximise the financial performance and growth of Cardno over time. In
general, the remuneration approach includes a reasonable percentage of potential annual remuneration
for senior managers to be delivered as a risk variable remuneration. The Board has determined that this
remuneration method is likely to contribute significantly to improved senior manager performance and
better financial outcomes achieved in Cardno’s operations.
Where the Executive Directors participate in equity-based incentive plans, the details are submitted to
shareholders for approval.
The Non-Executive Directors of Cardno Limited are entitled to fees that are determined by the Board on
commencement of the role and reviewed on an annual basis taking into account competitive market
practices for companies with a similar size and complexity to Cardno. Fees include compulsory
superannuation contributions. Non-Executive Directors do not participate in equity plans of Cardno and
do not receive retirement benefits. Fees are paid for Non-Executive Directors membership of the Board
and for the Chairmen and members of the Audit, Risk and Compliance Committee and the
Remuneration Committee, with the exception of the Chairman of the Company who is paid an
all-inclusive annual fee inclusive of Committee fees.
The company’s Trading Policy specifically prohibits any Director, senior managers or employee from
transacting in short selling, trading in products which limit the risk associated with the holding of
unvested securities or profiting from trading in securities which decrease in market value. A copy of
this policy can be accessed in the Investor Centre of the Cardno website.
The role, objectives and responsibilities of the Remuneration Committee is set out in its Terms of
Reference which can be viewed in the Investor Centre of the Cardno website.
Page 31 of 86
Consolidated Statement of Financial Performance
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Revenue
Employee expenses
Consumables and materials used
Sub-consultant and contractor costs
Depreciation and amortisation expenses
Financing costs
Other expenses
Profit before income tax
Income tax expense
Profit for the year
Profit attributable to:
Owners of the Company
Note
2
2012
$’000
965,820
2011
$’000
831,201
(425,594)
(200,950)
(171,305)
(16,111)
(7,500)
(39,318)
(321,233)
(158,212)
(216,345)
(11,356)
(4,501)
(35,251)
105,042
(30,874)
74,168
84,303
(25,501)
58,802
3
3
4
74,168
74,168
58,802
58,802
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
29
29
61.73
59.81
56.29
55.35
The statement of financial performance should be read in conjunction with notes 1 to 37 which form part of the financial
statements.
Page 32 of 86
Consolidated Statement of Comprehensive Income
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
Profit for the year
Other comprehensive income
Exchange differences on translation of foreign operations
2012
$’000
2011
$’000
74,168
58,802
11,445
(26,908)
Other comprehensive income for the year, net of tax
11,445
(26,908)
Total comprehensive income for the year
85,613
31,894
Total comprehensive income attributable to:
Owners of the Company
85,613
85,613
31,894
31,894
The statement of comprehensive income should be read in conjunction with notes 1 to 37 which form part of the financial
statements.
Page 33 of 86
Consolidated Statement of Financial Position
Cardno Limited and its Controlled Entities as at 30 June 2012
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Loans and borrowings
Current tax liabilities
Short term provisions
Other current liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Loans and borrowings
Deferred tax liabilities
Long term provisions
Other non-current liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
Note
2012
$’000
2011
$’000
6
7
8
9
10
11
12
13
14
15
16
17
18
19
13
20
21
22
107,856
175,471
108,032
4,047
395,406
570
783
43,497
11,731
506,762
563,343
84,047
118,205
80,107
4,957
287,316
535
669
31,937
5,446
355,709
394,296
958,749
681,612
122,990
2,073
12,644
33,546
31,301
151,222
1,859
5,514
19,561
32,934
202,554
211,090
196,769
493
9,146
902
207,310
104,535
140
8,023
628
113,326
409,864
324,416
548,885
357,196
460,947
(23,970)
111,908
548,885
311,383
(35,415)
81,228
357,196
The statement of financial position should be read in conjunction with notes 1 to 37 which form part of the financial statements.
Page 34 of 86
Consolidated Statement of Changes in Equity
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
BALANCE AT 1 JULY 2010
Profit for the year
Exchange differences on translation of
foreign operations
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Shares issued
Employee share based payments
Dividends paid or provided
BALANCE AT 30 JUNE 2011
Profit for the year
Exchange differences on translation of
foreign operations
Total comprehensive income for the year
Transactions with owners in their
capacity as owners:
Shares issued
Employee share based payments
Dividends paid or provided
BALANCE AT 30 JUNE 2012
22
22
5
22
22
5
Note
Share
Capital
Ordinary
$’000
252,080
-
-
-
57,038
2,265
-
59,303
311,383
-
-
-
Retained
Earnings
$’000
56,399
58,802
-
58,802
-
-
(33,973)
(33,973)
81,228
74,168
-
74,168
Foreign
Translation
Reserve
$’000
(8,507)
Total
$’000
299,972
-
58,802
(26,908)
(26,908)
(26,908)
31,894
-
-
-
-
(35,415)
57,038
2,265
(33,973)
25,330
357,196
-
74,168
11,445
11,445
11,445
85,613
146,872
2,692
-
149,564
460,947
-
-
(43,488)
(43,488)
111,908
-
-
-
-
(23,970)
146,872
2,692
(43,488)
106,076
548,885
The statement of changes in equity should be read in conjunction with notes 1 to 37 which form part of the financial statements.
Page 35 of 86
Consolidated Statement of Cash Flows
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Interest received
Finance costs paid
Cash paid to suppliers and employees
Income tax paid
NET CASH PROVIDED BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of subsidiaries, net of cash acquired
Acquisition of subsidiaries, deferred consideration paid
Proceeds from sale of property, plant &
equipment
Payments for property, plant & equipment
NET CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Share issue transaction costs
Proceeds from borrowings
Repayment of borrowings
Finance lease payments
Dividends paid
Note
2012
$’000
2011
$’000
24(a)
24(d)
991,723
1,874
(7,755)
(884,264)
(28,949)
858,262
1,949
(5,338)
(757,529)
(23,816)
72,629
73,528
(148,960)
(65,941)
(10,503)
(1,832)
835
(15,897)
588
(9,063)
(229,963)
(20,810)
144,984
(3,774)
240,581
(159,199)
(2,347)
(40,794)
54,694
(2,054)
10,294
(50,210)
(2,474)
(31,942)
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES
179,451
(21,692)
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS HELD
22,117
31,026
CASH AND CASH EQUIVALENTS AT 1 JULY
84,047
56,282
Effects of exchange rate changes on cash
and cash equivalents at the end of year
1,692
(3,261)
CASH AND CASH EQUIVALENTS AT 30 JUNE
24(b)
107,856
84,047
The statement of cash flow should be read in conjunction with notes 1 to 37 which form part of the financial statements.
Page 36 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
Cardno Limited (the “Company”) is a company incorporated and domiciled in Australia. The consolidated financial
report of the Company for the year ended 30 June 2012 encompasses the Company and its subsidiaries (together
referred to as “Cardno” or the “Group”).
Cardno is a for-profit entity and operates as a provider of professional services in physical and social infrastructure.
The financial report was authorised for issue by the Board of Directors on 13 August 2012.
(a) Statement of compliance
The financial report is a general purpose financial report which has been prepared in accordance with Australian
Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act
2001. The financial report of the consolidated entity also complies with International Financial Reporting Standards
(IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).
(b) Basis of Preparation
The financial report has been prepared on a historical cost basis except for derivative financial instruments which
are measured at fair value.
The consolidated financial statements are presented in Australian dollars, which is the Company’s functional
currency.
A number of new standards, amendments to standards and interpretations are effective for annual periods
beginning after 1 July 2012, and have not been applied in preparing these consolidated financial statements.
None of these is expected to have a significant effect on the consolidated financial statements of Cardno, except
for AASB 9 Financial Instruments, which becomes mandatory for Cardno’s 2016 consolidated financial statements
and could change the classification and measurement of financial assets. Cardno does not plan to adopt this
standard early and the extent of the impact has not been determined.
The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that
Class Order, all financial information presented in Australian dollars has been rounded to the nearest thousand
unless otherwise stated.
Certain comparative amounts in the financial report have been reclassified to conform with the current year’s
presentation.
(c) Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by Cardno. Control exists when the Company has the power, directly or
indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In
assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The
financial statements of subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted
by Cardno.
A list of the significant subsidiaries is contained in Note 37 to the financial statements. All controlled entities have
a June financial year-end.
Transactions eliminated on consolidation
Intra-group balances and transactions, unrealised gains and losses and inter-entity balances resulting from
transactions with or between controlled entities are eliminated in full on consolidation.
Page 37 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(d) Goods and Services Tax
Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except where
the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from,
or payable to, the tax authority is included as a current asset or liability in the consolidated balance sheet.
Cash flows from operating activities are included in the cash flow statements on a gross basis. The GST
components of cash flows arising from investing and financing activities which are recoverable from, or payable
to, the tax authority are classified as operating cash flows.
(e) Foreign Currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at
exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies
at the reporting date are translated to the functional currency at the foreign exchange rate at that date. The
foreign currency gain or loss on monetary items is the difference between amortised cost in the functional
currency at the beginning of the period, adjusted for effective interest and payments during the period, and the
amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets
and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional
currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising
on retranslation are recognised in profit or loss, except for differences arising on the translation of available-for-
sale equity instruments, a financial liability designated as a hedge of the net investment in a foreign operation, (see
(ii) below) or qualifying cash flow hedges, which are recognised in other comprehensive income. Non-monetary
items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at
the date of the transaction.
(ii) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition,
are translated to Australian dollars at exchange rates at the reporting date. The revenue and expenses of foreign
operations are translated to Australian dollars at rates approximating the foreign exchange rates at the dates of the
transactions.
Foreign currency differences are recognised in other comprehensive income in the foreign currency translation
reserve (FCTR). When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is
transferred to profit or loss.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation,
the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net
investment in a foreign operation and are recognised in other comprehensive income and are presented within
equity in the FCTR.
(iii) Hedge of net investment in foreign operation
Foreign currency differences arising on the translation of a financial liability designated as a hedge of a net
investment in a foreign operation are recognised in other comprehensive income to the extent that the hedge is
effective, and are presented within equity in the FCTR. To the extent that the hedge is ineffective, such
differences are recognised in profit or loss. When the hedged part of a net investment is disposed of, the relevant
amount in the FCTR is transferred to profit or loss as part of the profit or loss on disposal.
(f) Revenue Recognition
Revenue is recognised at fair value of the consideration received net of the amount of goods and services tax
(GST) payable to the taxation authority.
Sale of goods
Revenue from the sale of goods is recognised (net of rebates, discounts and other allowances) upon the delivery of
goods to the customer.
Page 38 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(f) Revenue Recognition continued
Consulting revenue
Revenue from consulting services which are provided on a time and material basis is recognised at the contractual
hourly rates as labour hours are delivered and direct expenses are incurred. For long term contracts, revenue and
expenses are recognised in accordance with the percentage of completion method. Where a loss is expected to
arise from a contract, the loss is recognised immediately as an expense. The percentage of completion is
determined by costs to date versus estimated total project costs.
Dividends
Revenue from dividends is recognised by the consolidated entity when dividends are received.
(g) Leases
Leases in terms of which Cardno assumes substantially all the risks and rewards of ownership are classified as
finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair
value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to that asset. The corresponding rental
obligations, net of finance charges, are included in current and non-current interest-bearing loans and borrowings.
Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding
liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic
rate of interest on the remaining balance of the liability.
Other leases are operating leases and are not recognised in Cardno’s statement of financial position. Payments
made under operating leases which are subject to fixed annual increments are recognised in the income statement
on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income
statement as an integral part of the total lease expense and are spread over the lease term.
(h) Net Financing Costs
Interest income is recognised in profit and loss as it accrues, using the effective interest method.
Borrowing costs are calculated using the effective interest method and include interest, amortisation of discounts
or premiums relating to borrowings and amortisation of ancillary costs incurred in connection with arrangement of
borrowings and foreign exchange differences arising from foreign currency borrowings to the extent that they are
regarded as an adjustment to interest costs.
Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets
which take a substantial period of time to get ready for their intended use or sale. Where funds are borrowed
specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs
capitalised is the amount incurred in relation to that borrowing, net of any interest earned on those borrowings.
Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate.
(i) Income Tax
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or
liabilities in a transaction that is not a business combination and that affects neither accounting or taxable profit,
and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable
that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable
temporary differences arising on the initial recognition of goodwill.
Page 39 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(i) Income Tax continued
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax
assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities
will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available
against which the temporary difference can be utilised. Deferred tax assets are reviewed at each reporting date
and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability
to pay the related dividend is recognised.
Tax consolidation
The Company and its wholly-owned Australian resident entities are part of a tax-consolidated group. As a
consequence, all members of the tax-consolidated group are taxed as a single entity from the date of forming the
tax consolidated Group. The head entity within the tax-consolidated Group is Cardno Limited.
Nature of tax funding arrangements and tax sharing arrangements
The head entity, in conjunction with other members of the tax-consolidated Group, has entered into a tax funding
arrangement which sets out the funding obligations of members of the tax-consolidated Group in respect of tax
amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax
liability/(asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity.
(j) Segment Reporting
Segment results that are reported to the chief operating decision makers include items directly attributed to the
segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise head
office expenses, financing costs, and income tax expense.
Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment,
and intangible assets other than goodwill.
(k) Trade and Other Receivables
Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts.
Interest income is recognised as it accrues. The recoverability of trade receivables is reviewed on an ongoing
basis. An estimate for impairment of receivables is made when there is objective evidence collection of the full
nominal amount is no longer probable. Bad debts are written off as incurred.
(l) Inventories
Work in progress is stated at the aggregate of contract costs incurred to date plus recognised profits less
recognised losses and progress billings. If there are contracts where progress billings exceed the aggregate costs
incurred plus profits less losses, the net amounts are presented as unearned revenue under other liabilities.
Contract costs include all costs directly related to specific contracts, costs that are specifically chargeable to the
customer under the terms of the contract and an allocation of overhead expenses incurred in connection with
Cardno’s activities in general.
The recoverability of work in progress is reviewed on an ongoing basis. Amounts assessed as not recoverable
from future billings are written off when identified.
Page 40 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(m) Property, Plant and Equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed
assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to
a working condition for its intended use, the costs of dismantling and removing the items and restoring the site on
which they are located, and capitalised borrowing costs. Cost also may include transfers from other
comprehensive income of any gain or loss on qualifying cash flow hedges of foreign currency purchases of
property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is
capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within
profit or loss.
Subsequent costs
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits associated with the item will flow to Cardno and the cost of
the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and
maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation
Depreciation is calculated on the depreciable amount, which is the cost of an asset, or other amount substituted
for cost, less its residual value.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an
item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their
useful lives unless it is reasonably certain that Cardno will obtain ownership by the end of the lease term. Land is
not depreciated.
The estimated useful lives for the current and comparative periods are as follows:
buildings
laboratory equipment, instruments and amenities
motor vehicles
leasehold improvements
office furniture and equipment
40 years
4-7 years
4-7 years
4-5 years
3-11 years
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
(n) Intangible Assets
Business Combinations and Goodwill
Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date
on which control is transferred to Cardno. Control is the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. In assessing control, Cardno takes into consideration potential
voting rights that currently are exercisable.
Cardno measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
Page 41 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(n) Intangible Assets continued
Business Combinations and Goodwill continued
the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is
achieved in stages, the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, the gain is recognised immediately in profit or loss.
Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships.
Such amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that
Cardno incurs in connection with a business combination are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not remeasured and settlement is accounted for within equity.
Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.
When share-based payment awards (replacement awards) are required to be exchanged for awards held by the
acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the
acquirer’s replacement awards is included in measuring the consideration transferred in the business combination.
This determination is based on the market-based value of the replacement awards compared with the market-
based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future
service.
Works contracts, software intangibles and customer relationships
Works contracts, software intangibles and customer relationships are acquired by Cardno and are stated at cost
less accumulated amortisation and impairment losses. Amortisation is calculated based on the timing of projected
cash flows of the contracts over their estimated useful lives, which currently vary from 1 to 7 years.
Patents and Licenses
Patents and licenses acquired by Cardno are considered to have indefinite useful lives and are stated at cost less
any impairment losses. Patents and licences are not amortised but tested for impairment annually.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic
benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.
(o) Amortisation
Amortisation is calculated over the cost of the asset, or other amount substituted for cost, less its residual value.
Amortisation is charged to the profit and loss on a systematic basis over the estimated useful lives of intangible
assets unless such lives are indefinite. Goodwill and intangible assets with an indefinite life are not amortised but
are systematically tested for impairment each year at the same time. Works contracts which are assigned a value
are amortised over the life of the contract from the date they are available for use.
Amortisation methods, useful lives and residual values are reviewed at each reporting date.
(p) Impairment
The carrying amount of Cardno’s assets, other than inventories (see paragraph (l)), and deferred tax assets (see
paragraph (i)), are reviewed at each reporting date to determine whether there is any indication of impairment. If
any such indication exists, an impairment test is performed. Cardno performs impairment testing of goodwill and
intangibles with indefinite useful lives annually.
Page 42 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(p) Impairment continued
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its
recoverable amount. Impairment losses are recognised in the profit and loss unless the asset has previously been
revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation
with any excess recognised through the profit and loss.
Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount
of any goodwill allocated to the cash-generating unit (group of units) and then, to reduce the carrying amount of
the other assets in the unit (group of units) on a pro rata basis.
Calculation of recoverable amount
The recoverable amount of Cardno’s receivables carried at amortised cost is calculated as the present value of
estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate
computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.
The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined
for the cash-generating unit to which the asset belongs.
Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which
goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level
at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is
allocated to groups of CGUs that are expected to benefit from the synergies of the combination.
Reversals of impairment
An impairment loss in respect of receivables carried at amortised cost is reversed if the subsequent increase in
recoverable amount can be related objectively to an event occurring after the impairment loss was recognised.
An impairment loss in respect of goodwill is not reversed.
In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to
determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been
recognised.
(q) Trade and Other Payables
Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not
billed to Cardno. Trade accounts payable are normally settled within 60 days. Trade and other payables are stated
at cost.
(r) Interest Bearing Borrowings
Interest bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to
initial recognition, interest bearing borrowings are stated at amortised cost with any difference between cost and
redemption value being recognised in the profit and loss over the period of the borrowings on an effective interest
rate basis.
(s) Employee Benefits
Wages, salaries and annual leave
Liabilities for employee benefits for wages, salaries and annual leave expected to be settled within 12 months of
the period end represent present obligations resulting from employees’ services provided to reporting date,
calculated at undiscounted amounts based on remuneration wage and salary rates that Cardno expects to pay as
at reporting date including related on-costs.
Page 43 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(s) Employee Benefits continued
Long-term service benefits
The provisions for employee entitlements to long service leave and other deferred employee benefits represent the
present value of the estimated future cash outflows to be made by the employer resulting from employees’
services provided up to the balance date and include related on-costs. In determining the liability for long service
leave, consideration has been given to future increases in wage and salary rates, and the consolidated entity’s
experience with staff departures.
Liabilities for employee entitlements which are not expected to be settled within 12 months are discounted using
the rates attached to national government securities at balance date, which most closely match the terms of
maturity of the related liabilities.
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a
separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for
contributions to defined contribution plans are recognised as an employee benefit expense in profit or loss in the
periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the
extent that a cash refund or a reduction in future payments is available. Contributions to a defined contribution
plan that are due more than 12 months after the end of the period in which the employees render the service are
discounted to their present value.
Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period that the employees unconditionally become
entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for
which the related service and non-market vesting conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the number of awards that meet the related service and
non-market performance conditions at the vesting date.
(t) Provisions
A provision is recognised in the balance sheet when Cardno has a present legal, equitable or constructive
obligation as a result of a past event, and it is probable that a future sacrifice of economic benefits will be required
to settle the obligation, the timing or amount of which is uncertain. If the effect is material, provisions are
determined by discounting the expected future cash flows at the pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability.
Dividends
A provision for dividends payable is recognised in the reporting period in which the dividends are declared.
(u) Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand and investments in money market instruments. Bank overdrafts
are shown with interest-bearing loans and borrowings in current liabilities on the statement of financial position.
(v) Earnings per Share
Cardno presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of
ordinary shares outstanding during the period.
Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares, which
comprise share Performance Options and Performance Rights granted to employees and rights issues to existing
shareholders, in the event of capitalisation.
The bonus element in a rights issue to existing shareholders increases the number of ordinary shares outstanding
without a corresponding change in resources. In this case, the number of ordinary shares outstanding before the
event is adjusted for the proportionate change in the number of ordinary shares outstanding as if the event had
Page 44 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
(v) Earnings per Share continued
occurred at the beginning of the earliest period presented. If the changes occur after the reporting period but
before the financial statements are authorised for issue, the per share calculations for those and any prior period
financial statements presented shall be based on the new number of shares. The fact that per share calculations
reflect such changes in the number of shares shall be disclosed. In addition, basic and diluted earnings per share of
all periods presented shall be adjusted for the effects of errors and adjustments resulting from changes in
accounting policies, accounted for retrospectively.
(w) Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that may have a financial impact on the entity and that are believed to be
reasonable under the circumstances.
Cardno makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are
discussed below.
Estimating impairment of goodwill – refer to notes 1(p) and 14.
Revenue recognition in relation to long term contracts including estimating stage of completion and total
contract costs – refer notes 1(f) and 2.
Accounting for business combinations including estimating fair values of identifiable assets acquired and
liabilities assumed – refer notes 1(n) and 33.
Page 45 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
2. REVENUE
Fees from services
Fees from sale of goods
Fees from recoverable expenses
Interest received
Royalties
Rental income
Other
Revenue
3. EXPENSES, LOSSES AND (GAINS)
Depreciation
Motor vehicles
Other property, plant & equipment
Total Depreciation
Amortisation of intangibles
Works contracts
Software intangibles
Customer relationships
Total Amortisation
Total Depreciation & Amortisation
Bad and doubtful debts
Financing costs
Interest and finance charges
Amortisation of borrowing costs
Total financing costs
Rental expense relating to operating leases
Minimum lease payments
2012
$’000
2011
$’000
701,174
8,223
250,552
1,874
210
636
3,151
562,566
7,532
257,567
1,948
189
616
783
965,820
831,201
3,336
8,675
12,011
3,511
131
458
4,100
2,510
7,381
9,891
1,146
156
163
1,465
16,111
11,356
3,791
3,713
6,071
1,429
7,500
3,673
828
4,501
27,292
21,969
Net loss/(gain) on disposal of property, plant and equipment
364
2
Foreign exchange (gains) / losses
(2,348)
(668)
4. INCOME TAX EXPENSE
(a) The components of tax expense comprises:
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Origination and reversal of temporary differences
Adjustments for prior years
Total income tax expense/(benefit)
31,218
4,128
35,346
1,078
(5,550)
(4,472)
30,874
27,674
(623)
27,051
(1,550)
-
(1,550)
25,501
Page 46 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
4. INCOME TAX EXPENSE CONTINUED
(b) Numerical reconciliation between tax expense and pre-tax profit
Profit before tax
Income tax using the Australian corporation tax rate of 30% (2011:
30%)
Increase (decrease) in income tax expense due to:
Non-deductible expenses
Adjustment for branch office taxation
Allowances for R&D expenditure
Benefit arising from amendment to Australian tax legislation
Sundry items
Under / (over) provided in prior years
Income tax expense
5. DIVIDENDS PAID OR PROVIDED FOR ON ORDINARY SHARES
(a) Dividends proposed subsequent to year end not recognised as a
liability
70% franked dividend at 30% (2011: 70% at 30%) (Refer Note 28)
(b) Dividends paid during the year (Final 2011: 17 cents per share, 70%
franked at 30%. Interim 2012: 18 cents per share, 70% franked at
30%) (2011: all dividends 70% franked at 30%)
(c) Franking credit balance
The amount of franking credits available for the subsequent financial
year are:
-
-
franking account balance as at the end of the financial year at
30%
franking credits that will arise from the payment of income tax
payable as at the end of the financial year
The impact on the franking account of dividends proposed after the
balance sheet date but not recognised as a liability is to reduce it by
$7,479,346 (2011: $5,598,782)
6. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Restricted cash (project advances)
Bank short term deposits
7. TRADE & OTHER RECEIVABLES (CURRENT)
Trade debtors
Provision for doubtful debts
Sundry debtors
8. INVENTORIES (CURRENT)
Work in progress
Page 47 of 86
2012
$’000
2011
$’000
105,042
31,513
84,303
25,291
1,737
3,999
(1,609)
(1,975)
(1,369)
32,296
(1,422)
30,874
1,212
3,361
(3,353)
-
(385)
26,126
(625)
25,501
24,931
18,663
43,488
33,973
6,932
10,256
10,932
7,925
17,864
18,181
83,742
2,373
21,741
107,856
57,016
4,652
22,379
84,047
181,147
(12,233)
119,415
(6,376)
168,914
113,039
6,557
5,166
175,471
118,205
108,032
80,107
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
9. OTHER CURRENT ASSETS
Prepayments
Project advances
Security deposits
10. TRADE & OTHER RECEIVABLES (NON-CURRENT)
Sundry debtors
11. OTHER FINANCIAL ASSETS (NON-CURRENT)
Investments in non-related entities
12. PROPERTY, PLANT & EQUIPMENT
Laboratory equipment, instruments & amenities
Less accumulated depreciation
Motor vehicles
Less accumulated depreciation & amortisation
Office furniture & equipment
Less accumulated depreciation & amortisation
Leasehold improvements
Less accumulated depreciation & amortisation
Land and buildings
Less accumulated depreciation
2012
$’000
2011
$’000
2,035
92
1,920
4,047
3,040
172
1,745
4,957
570
535
783
669
25,044
(16,459)
8,585
24,567
(14,104)
10,463
13,694
(8,554)
5,140
18,830
(11,360)
7,470
56,104
(38,417)
40,147
(27,501)
17,687
12,646
10,523
(5,112)
5,411
2,195
(844)
1,351
9,899
(4,497)
5,402
1,974
(695)
1,279
Total Property Plant & Equipment
43,497
31,937
Page 48 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
12. PROPERTY, PLANT & EQUIPMENT CONTINUED
Movements in carrying amounts
Movements in the carrying amounts for each class of property, plant and
equipment between the beginning and the end of the current financial year.
Laboratory equipment, instruments & amenities
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Disposals
Depreciation expense
Transfer between classes
Foreign exchange
Carrying amount at the end of the year
Motor vehicles
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Disposals
Depreciation and amortisation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
Office furniture & equipment
Carrying amount at the beginning of the year
Additions
Increase through merger acquisitions
Disposals
Depreciation and amortisation expense
Foreign exchange
Transfer between classes
Carrying amount at the end of the year
Leasehold improvements
Carrying amount at the beginning of the year
Additions
Increase through merger acquisitions
Disposals
Depreciation and amortisation expense
Foreign exchange
Transfer between classes
Carrying amount at end of the year
Property
Carrying amount at the beginning of the year
Additions
Increase through merger acquisition
Depreciation expense
Transfer between classes
Foreign exchange
Carrying amount at the end of the year
Carrying amount at the end of the year
Page 49 of 86
2012
$’000
2011
$’000
5,140
3,044
1,963
(100)
(1,925)
300
163
8,585
7,470
5,726
1,052
(374)
(3,336)
97
(172)
10,463
12,646
8,333
2,154
(301)
(5,628)
312
171
17,687
5,402
1,332
292
(424)
(1,024)
95
(262)
5,411
1,279
126
-
(98)
(37)
81
1,351
4,453
1,914
685
(64)
(1,422)
(226)
(200)
5,140
6,101
3,629
747
(270)
(2,510)
(135)
(92)
7,470
12,491
5,053
1,067
(220)
(4,863)
(955)
73
12,646
6,151
446
(17)
(37)
(1,044)
(342)
245
5,402
12
13
1,372
(52)
-
(66)
1,279
43,497
31,937
2012
$’000
2011
$’000
20,282
13,087
3,637
-
2,818
39,824
(28,093)
11,731
19,568
2,673
4,972
1,373
28,586
(28,093)
7,906
10,645
502
2,133
1,309
22,495
(17,049)
5,446
10,140
1,067
4,946
1,036
17,189
(17,049)
493
140
11,238
5,306
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
13. DEFERRED TAX ASSETS & LIABILITIES
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Assets
Accruals
Provisions
Work in progress
Unearned revenue
Other
Total deferred tax assets
Set-off of deferred tax liabilities
Net deferred tax assets
Liabilities
Work in progress
Property, plant and equipment
Goodwill on acquisition
Other
Total deferred tax liabilities
Set-off of deferred tax assets
Net deferred tax liabilities
NET DEFERRED TAX ASSETS (LIABILITIES)
30 June 2012
Movement in temporary differences
during the year:
Accruals
Provisions
Unearned revenue
Sundry items
Property, plant & equipment
Work in progress
Goodwill on acquisition (USA)
1 July 2011
$’000
7,004
10,643
2,133
1,110
(207)
(10,139)
(5,238)
5,306
Recognised
in profit or
loss
$’000
Adjustments
to prior
years
$’000
Acquired in
business
combination
$’000
30 June
2012
$’000
8,783
(1,526)
(2,133)
(1,641)
(1,741)
(3,053)
233
(1,078)
3,056
431
-
1,826
(407)
1,115
(471)
5,550
603
2,311
-
1,977
(725)
(2,739)
33
1,460
19,446
11,859
-
3,272
(3,080)
(14,816)
(5,443)
11,238
30 June 2011
Movement in temporary differences
during the year:
Accruals
Provisions
Unearned revenue
Sundry items
Property, plant & equipment
Work in progress
Goodwill on acquisition (USA)
1 July 2010
$’000
Recognised
in profit or
loss
$’000
Adjustments
to prior
years
$’000
Acquired in
business
combination
$’000
30 June
2011
$’000
2,335
10,032
-
(103)
(139)
(7,544)
(1,472)
3,109
4,357
55
2,133
1,213
(68)
(2,374)
(3,766)
1,550
-
-
-
-
-
-
-
-
312
556
-
-
-
(221)
-
647
7,004
10,643
2,133
1,110
(207)
(10,139)
(5,238)
5,306
Page 50 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
14. INTANGIBLE ASSETS
Goodwill at cost
Accumulated impairment losses
Works contracts
Accumulated amortisation
Patents and trademarks
Software intangibles
Accumulated amortisation
Customer relationships
Accumulated amortisation
Total Intangibles
Reconciliation of movement in carrying
amounts from beginning of year to end of
year:
Consolidated
2011
Balance at the beginning of year
Additions:
- acquisition through business combinations
- current year
- reclassification of intangibles*
- prior year
Amortisation charges
Effect of foreign exchange
2012
$’000
2011
$’000
499,277
-
499,277
352,133
-
352,133
9,505
(7,043)
2,462
3,622
(3,415)
207
2,110
2,110
1,355
(765)
590
2,953
(630)
2,323
1,319
(616)
703
710
(154)
556
506,762
355,709
Goodwill
Works
Contracts
Patents and
Trademarks
Software
Intangibles
$’000
$’000
$’000
$’000
Customer
Relation-
ships
$’000
335,671
322
2,110
996
-
57,743
(1,800)
255
-
(39,736)
-
1,053
-
(1,146)
(22)
-
-
-
-
-
-
-
-
(156)
(137)
703
-
-
747
-
(163)
(28)
556
Closing value at 30 June 2011
352,133
207
2,110
2012
Balance at the beginning of year
Additions:
- acquisition through business combinations
- current year
- reclassification of intangibles*
- prior year
Amortisation charges
Effect of foreign exchange
Closing value at 30 June 2012
352,133
207
2,110
703
556
132,200
(1,297)
1,500
-
14,741
499,277
4,946
815
-
(3,511)
5
2,462
-
-
-
-
-
2,110
-
-
-
(131)
18
590
1,715
482
-
(458)
28
2,323
* Amounts were reclassified from goodwill to identifiable intangible assets following completion of the purchase price accounting for
acquisitions which occurred in the prior year.
Page 51 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
14. INTANGIBLE ASSETS CONTINUED
Goodwill is allocated to the following cash-generating units:
Americas and Software
Emerging Markets Region
South East Australia & NZ
North & Western Australia
Geotechnical Division
Electrical Engineering Division
2012
$’000
2011
$’000
291,192
33,514
52,423
34,675
48,321
39,152
499,277
162,002
33,285
47,103
22,473
47,210
40,060
352,133
For the purposes of impairment testing, goodwill is allocated to Cardno’s management divisions which represent
the lowest level within Cardno at which the goodwill is monitored for internal management purposes.
The recoverable amount of each cash-generating unit above is determined based on value-in-use calculations.
Value-in-use is calculated based on the present value of cash flow projections over a 5 year period including a
terminal value at the end of year five. The cash flows are discounted using a pre-tax discount rate ranging from
13.2% to 15.2% (2011: 10.5% - 14.6%) (adjusted for risks specific to the cash generating unit) based on an
estimate of Cardno’s weighted average cost of capital.
The value-in-use calculations are based on budget forecasts for each cash generating unit for the 2013 year and
longer term year-on-year growth rates which are based on underlying economic conditions and cash generating
unit sector specific forecasts. Revenue, gross margin and costs have been estimated using growth assumptions
ranging from 1% to 5%. Sensitivity analysis performed indicates any reasonable possible change in any of the key
assumptions would not result in impairment.
15. TRADE & OTHER PAYABLES (CURRENT)
Trade payables & accruals
Vendor liability
16. LOANS & BORROWINGS (CURRENT)
Lease liabilities
Hire purchase liabilities
Bank loans
(i) Details of the terms and conditions of loans
and borrowings are set out in Note 19
17. SHORT-TERM PROVISIONS
Employee benefits
Legal provision
Movements in legal provision:
Balance at 1 July 2011
Increase through merger acquisition
Provision made during the year
Provision used during the year
Provision reversed during the year
Effect of foreign exchange
Balance at 30 June 2012
2012
$’000
2011
$’000
105,997
16,993
122,990
82,567
68,655
151,222
1,771
199
103
2,073
1,609
239
11
1,859
25,904
7,642
33,546
17,199
2,362
19,561
2,362
5,254
700
(571)
(500)
397
7,642
Cardno makes provision for legal claims not covered by Cardno’s professional indemnity policy and as at 30 June
an estimate of the potential impact of these claims has been provided for. As a result of the acquisition of ATC
Inc Cardno assumed a contingent liability of $5.3 million in respect of various legal claims.
Page 52 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
18. OTHER CURRENT LIABILITIES
Unearned revenue
Deferred rent
19. LOANS & BORROWINGS (NON-CURRENT)
Lease liabilities
Hire purchase liabilities
Bank Loans
2012
$’000
2011
$’000
31,301
-
31,301
32,923
11
32,934
3,895
260
192,614
3,128
2
101,405
196,769
104,535
Bank Loans
As at 30 June 2012 Cardno has bank loans totalling $194,012,464 (2011: $101,416,141), with an effective
interest rate of 2.20% (2011: 2.48%).
During the 2012 financial year, Cardno restructured its debt with a multiple currency facility, with four major
financial institutions. The new facility diversifies Cardno’s bank arrangements and extends the term of the debt
by incorporating 3 year ($94.1 million) and 5 year ($99.9 million) facilities. The facility limits comprise a multi-
currency working capital facility of AUD55.0 million (2011: AUD35.0 million) and term acquisition financing
facilities of USD195.0 million (2011: USD129.1 million) and GBP8.55 million (2011: GBP8.55 million). The
weighted average interest rate for term facilities ranges from 2.08% to 2.63% (2011: 2.56% to 2.91%).
Funding available to Cardno from undrawn facilities is AUD69.1million at 30 June 2012 (2011: AUD66.6
million). Facilities are secured by an unlimited interlocking guarantee and indemnity.
The portion of the bank loans disclosed as a current liability represents amounts due to be repaid within one year.
There were no bank overdrafts in existence at 30 June 2012 (2011: Nil).
20. LONG-TERM PROVISIONS
Employee benefits
21. OTHER NON-CURRENT LIABILITIES
Deferred rent
Other
2012
$’000
2011
$’000
9,146
8,023
281
621
902
297
331
628
22. ISSUED CAPITAL OF CARDNO LIMITED
Balance at the beginning of the period
Shares issued during the period:
- Dividend reinvestment scheme
- Shares issued for cash (net of transaction costs)
- Employee Tax Exempt Share Acquisition Plan
- Employee share based payments
- Exercise of Performance Options
30 June 2012
30 June 2011
No. of
shares
$’000
No. of
shares
$’000
107,405,725
311,383
90,510,461
252,080
468,704
27,853,171
513,511
-
1,918,250
2,694
134,794
2,968
2,692
6,416
399,663
16,106,665
388,936
-
-
2,033
52,654
2,351
2,265
-
Balance at the end of the year
138,159,361
460,947 107,405,725
311,383
The Company does not have authorised capital or par value in respect of its issued shares.
All shares are ordinary shares and have the right to receive dividends as declared and, in the event of winding up
the Company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and
amounts paid up on shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a
meeting of members.
Page 53 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
22. ISSUED CAPITAL OF CARDNO LIMITED CONTINUED
Performance Equity Plan (PEP)
The PEP is designed to reward strong performance by individuals within the Cardno Group of companies.
Performance Options and Performance Rights are issued under the PEP (made in accordance with thresholds set in
the plan approved at the 2009 AGM) which provides certain employees (as determined by the Board) with the
opportunity to acquire shares in the Company, or rights to acquire shares in the Company.
Movements in Performance Options throughout the year were as follows:
Grant Date
Vesting
Date
Expiry Date
5 December
2008
2 December
2009
29 November
2011
5 December
2011
2 December
2012
2 December
2013
25 November
2010
25 November
2013
25 November
2014
1 November
2011
1 November
2014
1 November
2015
Weighted average exercise price
Weighted average remaining contract life
Exercise
Price
$
Fair
Value
at
Grant
Date
$
Number of
Performance
Options at
Beginning of
Year
3.35
0.41
2,001,000
4.43
0.77
2,038,700
4.84
0.77
3,274,500
Performance
Options
Granted
Performance
Options
Lapsed
Performance
Options
Exercised
Number of
Performance
Options as at
30 June
2012
-
-
-
82,750
1,918,250
-
-
-
-
-
-
-
2,038,700
3,274,500
3,831,000
4.92
951 days
5.26
0.81
-
3,831,000
4.32
5.26
3.35
3.35
Total expense recognised $1,410,871 (2011: $1,681,706)
The Performance Options outstanding at 30 June 2012 have an exercise price in the range of $4.43 to $5.26.
These Performance Options do not entitle the holder to participate in any share issue of the Company.
The Performance Options issued prior to FY2010 are subject to a performance hurdle and will not vest unless
there has been at least a 5% compounded improvement per year in the earnings per share of the Company over
the vesting periods.
The Performance Options issued during and since FY2010 are subject to a performance hurdle and to vest the
Company must achieve earnings per share (EPS) growth in accordance with the following scale:
EPS Growth Over 3 Years
<12.5% (<4% pa)
12.5% (4% pa)
>12.5% (4% pa) & <26% (8% pa)
26% (8% pa)
>26% (8% pa) & <40% (12% pa)
≥40% (12% pa)
% of Performance Options in
Tranche to Vest
0%
30%
Pro rata
70%
Pro rata
100%
The fair value of Performance Options granted during the year have been calculated using the Black-Scholes
model, taking into account price volatility, risk free interest rates and the dividend yield.
The model inputs for the fair value of Performance Options granted during the year ended 30 June 2012 include
share price at grant date of $5.29 (2011: $4.86), expected price volatility of the Company’s shares of 31%
(2011: 30%), expected dividend yield of 6.30% (2011: 7.00%) and risk free interest rate of 3.19%
(2011: 4.90%).
Page 54 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
22. ISSUED CAPITAL OF CARDNO LIMITED CONTINUED
Movements in Performance Rights throughout the year were as follows:
Grant Date
Vesting Date
Expiry Date
Performance
Hurdle
Fair
Value
at
Grant
Date
$
Number of
Performance
Rights at
Beginning of
Year
Performance
Rights
Granted
Performance
Rights
Lapsed
Performance
Rights
Vested
Not
Exercised
Number of
Performance
Rights as at
30 June
2012
22 October
2009
22 October
2012
22 October
2013
2 December
2009
2 December
2012
2 December
2013
21 October
2010
21 October
2013
21 October
2014
25 November
2010
25 November
2013
25 November
2014
EPS Growth
3.96
TSR
3.19
EPS Growth
3.20
TSR
2.30
EPS Growth
3.78
TSR
2.71
EPS Growth
3.94
TSR
2.96
20 October
20 October
20 October
EPS Growth
4.21
2011
2014
2015
1 November
2011
1 November
2014
1 November
2015
TSR
2.81
EPS Growth
4.38
TSR
2.97
Total expense recognised $1,280,672 (2011: $609,182)
67,500
67,500
112,000
112,000
76,250
76,250
188,750
188,750
-
-
-
-
-
-
-
-
-
-
-
-
72,500
72,500
241,250
241,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
67,500
67,500
112,000
112,000
76,250
76,250
188,750
188,750
72,500
72,500
241,250
241,250
The fair values of Performance Rights granted during the year with a total shareholder return (TSR) performance
hurdle, have been calculated using a Monte-Carlo simulation valuation model taking into account price volatility,
risk free interest rates and comparator company shareholder return performance. The fair value of Performance
Rights with the EPS growth hurdle was calculated using a Black-Scholes model taking into account risk free
interest rates and the dividend yield.
The model inputs for the fair value of Performance Rights granted during the year ended 30 June 2012 include
share price of $5.09 for Performance Rights granted on 20 October 2011 (FY11: $4.67, 21 October 2010) and
$5.29 for Performance Rights granted on 1 November 2011 (FY11: $4.86, 25 November 2010), expected price
volatility of 32% and 31% respectively (FY11: 32% and 30%), expected dividend yield of 6.3% (FY11: 7.00%)
and risk free interest rate of 3.84% and 3.19% (FY11: 4.90%).
The Performance Rights are subject to performance hurdles measured over three financial years. 50% of the
Performance Rights may vest, on a sliding scale, dependent on relative total shareholder return performance and
50% of the Performance Rights may vest, on a sliding scale, dependent on earnings per share growth in
accordance with the following scale:
TSR of Cardno Relative to
TSRs of Companies in
Comparator Group
Over 3 Years
<50th percentile
50th percentile
>50th & <75th percentiles
75th percentile and above
% of Performance Rights
to Vest
(Tranche 1 50%)
EPS Growth Over 3 Years
% of Performance Rights to
Vest
(Tranche 2 50%)
0%
50%
Pro rata
100%
<12.5% (<4% pa)
12.5% (4% pa)
>12.5% (4% pa) & <26%
(8% pa)
26% (8% pa)
>26% (8% pa) & <40% (12%
pa)
≥40% (12% pa)
0%
30%
Pro rata
70%
Pro rata
100%
Page 55 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
22. ISSUED CAPITAL OF CARDNO LIMITED CONTINUED
Employee Share Acquisition Plans (ESAP)
Shares are issued under the ESAP (made in accordance with thresholds set out in plans approved by shareholders
at the 2009 AGM). It provides employees with the opportunity to acquire shares in the Company for no
consideration as a bonus component of their remuneration. Employees with 12 months service or greater who
have worked an average of 100 hours or more per month are entitled to $1,000 of shares each year and
employees with 6 to 12 months service are entitled to $500 of shares each year. Employees who work part time,
who have greater than 12 months service and who have worked more than 600 hours per year are also entitled to
$500 of shares each year. Shares issued under ESAP rank equally with other fully paid ordinary shares from the
date of issue.
Shares are issued in the name of the participating employee and are subject to a restriction period. The shares are
restricted under the plan until the earlier of three years from the date of acquisition or the date they cease to be an
employee. Once the restriction period is lifted the shares can be traded as fully paid ordinary shares. The ESAP
has no conditions that could result in the recipient forfeiting ownership of shares.
23. RESERVES
Foreign Currency Translation Reserve
The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of
the financial statements of foreign Group entities where their functional currency is different to the presentation
currency of the reporting entity as well as from the translation of liabilities that hedge the Company’s net
investment in a foreign subsidiary.
24. NOTES TO THE CASH FLOW STATEMENTS
(a) Reconciliation of Net Cash from Operating
Activities to Net profit for the year
Net profit for the year
Adjust for non-cash items
Depreciation and amortisation
Gain/(loss) on sale of property, plant & equipment
Net exchange differences
Share based remuneration
Adjust for changes in assets and liabilities
(increase) / decrease in assets:
Inventories
Deferred tax assets
Trade receivables
Provision for doubtful debts
Other receivables
Prepayments
Other assets
Increase / (decrease) in liabilities:
Trade payables
Income tax payable
Employee provisions
Unearned revenue
Other liabilities
Deferred tax liabilities
Page 56 of 86
2012
$’000
2011
$’000
74,168
58,802
16,111
364
4,702
5,660
11,354
2
(12,648)
4,630
(14,419)
(4,122)
(11,553)
1,669
(430)
696
(2,511)
(5,379)
6,397
4,155
(1,850)
(680)
(350)
72,629
(7,574)
(604)
227
(3,822)
(1,166)
2,002
(1,209)
16,711
2,813
1,402
3,174
(42)
(524)
73,528
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
24. NOTES TO THE CASH FLOW STATEMENTS CONTINUED
(b) Reconciliation of cash
For the purposes of the cash flow statements, cash includes cash on
hand, restricted cash and bank deposits at call net of bank overdrafts.
Cash at the end of the year as shown in the cash flow statements is
reconciled to related items in the accounts as follows:
Cash and cash equivalents (Note 6)
Restricted cash (project advances) can only be drawn in relation to
specific projects for which it has been provided.
(c) Non-cash financing and investing activities
During the financial year, the consolidated entity acquired property, plant
and equipment with an aggregate fair value of $2,666,780 (2011:
$1,992,336) by means of finance leases. These acquisitions are not
reflected in the cash flow statement.
(d) Acquisition of entities
Details of the acquisitions are as follows:
Purchase consideration
Cash consideration paid
Vendor liability
Consideration
Assets and liabilities held at acquisition date:
Cash
Receivables
Deferred tax assets
Property, plant & equipment
Intangibles
Inventories
Creditors and borrowings
Deferred tax liabilities
Provisions
Goodwill on acquisition*
Consideration
Net cash outflow on acquisition
Cash consideration paid
Less cash acquired
2012
$’000
2011
$’000
107,856
84,047
156,231
15,218
171,449
7,269
46,754
2,163
5,462
6,623
13,506
(29,881)
(703)
(11,944)
39,249
132,197
171,446
21,940
55,304
77,244
11,437
9,598
1,291
4,109
-
1,037
(4,230)
(222)
(3,520)
19,500
57,744
77,244
156,231
(7,271)
148,960
21,940
(11,437)
10,503
* As disclosed in note 33, the acquisition of ATC Inc was completed on 29 February 2012. Accordingly, the
accounting for this acquisition has been completed on a provisional basis. Further analysis will be performed to
determine and true up the fair value of identifiable assets acquired and liabilities assumed as part of the
acquisition.
Page 57 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
25. CAPITAL AND LEASING COMMITMENTS
(a) Finance leases and hire purchase
Commitments in relation to finance leases are payable as follows:
- Within one year
- Later than one year but not later than 5 years
- Later than 5 years
- Minimum lease payments
Less: Future finance charges
Recognised as a liability
Present value of minimum lease and hire purchase payment
Commitments in relation to finance leases are payable as follows:
- Within one year
- Later than one year but not later than 5 years
- Later than 5 years
Recognised as a liability
Finance leases are taken out over motor vehicle, leasehold improvements
and plant and equipment, with terms varying between 3 and 5 years.
Representing lease and hire purchase liabilities:
Current (note 16)
Non-current (note 19)
(b) Operating Leases
- Within one year
- Later than one year but not later than 5 years
- Later than 5 years
Commitments not recognised in the financial statements
Cardno leases office premises under operating leases, with terms varying
from 3 to 10 years. The majority of leases provide for an option of
renewal at the end of the lease term. Premise leases are subject to
annual review for changes in the CPI index and contain restrictions on
sub-leasing. Cardno also leases various plant & equipment under terms
between 2 and 5 years as well as software licenses with a term of 3
years subject to annual review based on the number of licences
exercised.
26. EMPLOYEE BENEFITS
The aggregate employee benefit liability is comprised of:
Accrued wages, salaries and on-costs (included in payables)
Provisions (current) (note 17)
Provisions (non-current) (note 20)
Number of employees
Number of employees at 30 June
Defined contribution superannuation expense
Page 58 of 86
2012
$’000
2011
$’000
2,537
5,003
-
7,540
(1,415)
6,125
1,970
4,155
-
6,125
1,970
4,155
6,125
33,352
73,420
16,804
123,576
2,351
3,749
-
6,100
(1,122)
4,978
1,848
3,130
-
4,978
1,848
3,130
4,978
23,720
47,740
23,557
95,017
20,456
25,904
9,146
55,506
No.
7,208
16,025
17,199
8,023
41,247
No.
4,342
$
$
15,760,497 11,994,190
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
27. CONTINGENT LIABILITIES
As at the date of this report, there is no current litigation or pending or threatened litigation which would not be
covered by professional indemnity insurance or has not already been provided for in the financial statements of
Cardno, or which is likely to have a material effect on the financial performance of Cardno.
Cardno had contingent liabilities at 30 June 2012 in respect of:
Bank guarantees
2012
$’000
2011
$’000
12,381
9,391
Cardno has bank guarantees with financial institutions. A multiple guarantee facility is available to Cardno totalling
AUD$19 million and USD$5 million (2011: AUD$19 million). These facilities are secured by an unlimited
interlocking guarantee and indemnity.
28. SUBSEQUENT EVENTS
On 2 July 2012, Cardno acquired 100% of Marshall Miller & Associates, Inc and EM-Assist Inc for up to
US$31.0 million and US$14.3 million respectively. Each of the acquisitions has a percentage of the purchase
price subject to the attainment of performance targets. Marshall Miller & Associates, Inc is a 180-person mining,
energy and environmental consulting firm headquartered in Virginia, USA while EM-Assist Inc is a 150-person
environmental services and compliance management firm headquartered in California, USA. The acquisitions were
funded by a mix of cash (from available cash reserves and debt facilities) and shares issued.
On 13 August 2012, the Directors of Cardno Limited declared a final dividend of 18 cents per share (70%
franked) for the 2012 financial year. The dividend will be paid on 12 October 2012 to shareholders registered on
14 September 2012 and will total $24,931,153. The dividend has not been provided for in the 30 June 2012
financial statements.
2012
$
2011
$
29. EARNINGS PER SHARE
Basic earnings per share
The calculation of basic earnings per share at 30 June 2012 was based
on the profit attributable to ordinary shareholders of $74,168,212
(2011: $58,802,020) and a weighted average number of ordinary shares
outstanding during the financial year ended 30 June 2012 of
120,147,400 (2011: 104,463,652), calculated as follows:
Profit attributable to ordinary shareholders
74,168,212
58,802,020
Weighted average number of ordinary shares
Issued ordinary shares at 1 July
Effect of shares issued for cash consideration
Effect of shares issued in respect of employee share scheme
No.
107,405,725
12,546,653
195.022
No.
90,510,461
13,824,398
128,793
Weighted average number of ordinary shares at 30 June
120,147,400
104,463,652
Performance Options and Performance Rights are considered to be
potential ordinary shares and are therefore excluded from the weighted
average number of ordinary shares used in the calculation of basic
earnings per share. Where dilutive, potential ordinary shares are included
in the calculation of diluted earnings per share.
Page 59 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
29. EARNINGS PER SHARE CONTINUED
Profit attributable to ordinary shareholders (diluted)
Profit attributable to ordinary shareholders
2012
$
2011
$
74,168,212
58,802,020
Profit attributable to ordinary shareholders (diluted)
74,168,212
58,802,020
Weighted average number of ordinary shares (diluted)
Weighted average number of ordinary shares at 30 June
Effect of Performance Options and Performance
Rights on issue
No.
No.
120,147,400 104,463,652
1,771,232
3,854,796
Weighted average number of ordinary shares (diluted) at 30 June
124,002,196 106,234,884
9,144,200 Performance Options issued during the 2010 to 2012 financial years and still on issue as at 30 June
2012 have been included in the calculation of diluted earnings per share because they are dilutive for the year
ended 30 June 2012.
30. AUDITOR’S REMUNERATION
Audit services
Auditors of the Company
KPMG Australia:
- Audit and review of financial reports
Other regulatory requirements
-
Overseas KPMG firms:
- Audit and review of financial reports
Other services
Auditors of the Company
KPMG Australia:
- Other assurance services
Overseas KPMG firms:
- Other services
2012
$
2011
$
404,000
4,500
305,500
-
451,105
859,605
350,063
655,563
21,000
9,700
30,700
-
-
-
31. KEY MANAGEMENT PERSONNEL DISCLOSURES
Key management personnel compensation included in employee benefits are as follows:
Short-term employee benefits
Long-term benefits
Post-employment benefits
Termination benefits
Equity compensation benefits
2012
$’000
2011
$’000
6,055
-
351
-
989
7,395
4,996
592
423
-
366
6,377
Apart from the details disclosed in this note, no Director has entered into a material contract with the Company or
the consolidated entity since the end of the previous financial year and there were no material contracts involving
Directors’ interests existing at year-end.
Page 60 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
31. KEY MANAGEMENT PERSONNEL DISCLOSURES CONTINUED
Performance Options and Performance Rights over equity instruments granted as compensation
The movement during the reporting period in the number of Performance Options over ordinary shares in Cardno
Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is
as follows:
2012 PERFORMANCE
OPTIONS
Held at
1 July 2011
Granted as
compensation
Lapsed
Vested &
Exercised
Held at
30 June 2012
Vested and
exercisable at
30 June 2012
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
-
-
-
60,000
-
70,000
60,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(60,000)
-
(70,000)
(60,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
No Performance Options held by key management personnel had vested and were exercisable as at 30 June 2012.
2011 PERFORMANCE
OPTIONS
Held at
1 July 2010
Granted as
compensation
Lapsed
Vested &
expired
(not exercised)
Held at
30 June 2011
Vested and
exercisable at
30 June 2011
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn*
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
150,000
70,000
50,000
40,000
105,000
-
125,000
105,000
-
-
*Retired from board of directors 21 October 2010
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(150,000)
(70,000)
(50,000)
(40,000)
(45,000)
-
(55,000)
(45,000)
-
-
-
-
-
-
60,000
-
70,000
60,000
-
-
-
-
-
-
-
-
-
-
-
-
The movement during the reporting period in the number of Performance Rights over ordinary shares in Cardno
Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is
as follows:
2012 PERFORMANCE
RIGHTS
Held at
1 July 2011
Granted as
compensation
Vested
Held at
30 June 2012
Vested and
exercisable at
30 June 2012
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
130,000
65,000
52,500
65,000
-
65,000
65,000
33,000
25,000
80,000
35,000
30,000
40,000
35,000
40,000
50,000
30,000
30,000
-
-
-
-
-
-
-
-
-
210,000
100,000
82,500
105,000
35,000
105,000
115,000
63,000
55,000
-
-
-
-
-
-
-
-
-
Page 61 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
31. KEY MANAGEMENT PERSONNEL DISCLOSURES CONTINUED
2011 PERFORMANCE
RIGHTS
Held at
1 July 2010
Granted as
compensation
Vested
Held at
30 June 2011
Vested and
exercisable at
30 June 2011
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn*
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
60,000
30,000
25,000
20,000
30,000
-
30,000
30,000
8,000
-
70,000
35,000
27,500
20,000
35,000
-
35,000
35,000
25,000
25,000
*Retired from board of directors 21 October 2010
-
-
-
-
-
-
-
-
-
-
130,000
65,000
52,500
40,000
65,000
-
65,000
65,000
33,000
25,000
-
-
-
-
-
-
-
-
-
-
The fair value of Performance Options and Performance Rights are provided in the Remuneration Report section of
the Directors’ Report and in note 22.
Movements in shares
The movement during the reporting period in the number of ordinary shares in Cardno Limited held, directly,
indirectly or beneficially, by each director and key management person, including their related parties, is as
follows:
Held at 1 July
2011
Purchases
Received as
Compensation
Sales
Held at 30 June
2012
-
-
-
-
-
-
-
-
-
173
86
173
173
173
173
-
-
-
-
-
-
-
-
(500,000)
(170,000)
-
-
-
-
-
5,084
979
-
268,839
3,500
64,816
2,520,261
31,237
1,600,001
749,198
86
971,458
251,459
6,225
11,437
2012
Non–Executive Directors
Anthony Barnes
Peter Cosgrove
Tonianne Dwyer*
Ian Johnston
John Marlay**
John Massey
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
4,307
-
-
241,955
-
58,334
2,450,261
26,466
2,050,001
777
979
-
26,884
3,500
6,482
70,000
4,771
50,000
Senior Executives
Roger Collins-Woolcock
Jean-Francois Floury
Paul Gardiner
Michael Renshaw
Kylie Sprott
Ross Thompson
* Tonianne Dwyer was appointed as a director on 25 June 2012
** John Marlay was appointed as a director on 1 November 2011
704,103
-
850,939
191,286
5,165
430
214,922
-
120,346
60,000
887
10,834
Page 62 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
31. KEY MANAGEMENT PERSONNEL DISCLOSURES CONTINUED
Held at 1 July
2010
Purchases
Received as
Compensation
Sales
Held at 30 June
2011
2011
Non–Executive Directors
Anthony Barnes
Peter Cosgrove
Ian Johnston
John Massey
Executive Directors
Andrew Buckley
Jeffrey Forbes
Trevor Johnson
Graham Tamblyn*
3,466
-
207,390
50,000
2,359,037
21,305
1,967,399
1,216,851
Senior Executives
653,897
Roger Collins-Woolcock
800,386
Paul Gardiner
163,817
Michael Renshaw
3,580
Kylie Sprott
Ross Thompson
348
*Retired from board of directors 21 October 2010
841
-
34,565
8,334
91,224
5,161
82,602
31,360
50,041
50,388
27,304
1,420
82
-
-
-
-
-
-
-
-
165
165
165
165
-
-
-
-
-
-
-
-
(238,695)
-
-
-
-
-
4,307
-
241,955
58,334
2,450,261
26,466
2,050,001
1,009,516
704,103
850,939
191,286
5,165
430
Other key management personnel transactions with the Company or its controlled entities
A number of key management persons, or their related parties, hold positions in other entities that result in them
having control or significant influence over the financial or operating policies of those entities.
None of these entities transacted with the Company or its subsidiaries in the reporting period.
32. FINANCIAL RISK MANAGEMENT
The main risks arising from Cardno’s financial instruments are interest rate risk, foreign exchange risk, credit risk
and liquidity risk. Cardno uses different methods to measure different types of risk to which it is exposed. These
methods include sensitivity analysis in the case of interest rate and foreign exchange risks and ageing analysis for
credit risk. The Board through the Audit, Risk & Compliance Committee reviews and agrees policies for managing
these risks and ensures strategies are implemented in the business. A Quality Management System and an
Operational Risk Committee supports consistent risk mitigation practices and procedures in order to maintain a
consistent level of quality across Cardno which includes the minimisation of risk. The policies for managing each
of Cardno’s risks are summarised below and remain unchanged from the prior year.
Cardno holds the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables
Investments in non-related entities
Financial liabilities
Trade and other payables
Interest-bearing loans and borrowings
2012
$’000
2011
$’000
107,856
176,041
783
284,680
84,047
118,740
669
203,456
130,632
198,842
329,474
153,584
106,394
259,978
Page 63 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
32. FINANCIAL RISK MANAGEMENT CONTINUED
Credit risk
Credit risk is the risk of financial loss to Cardno if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from Cardno’s receivables from customers.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as
summarised above.
Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit
evaluations are performed on customers in accordance with the policy.
Cardno does not require collateral in respect of financial assets.
Investments are allowed only in liquid securities and only with counterparties that have a credit rating equal to or
better than a rating approved by the Audit, Risk & Compliance Committee.
There are no material concentrations of credit risk.
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
Australia & New Zealand
Americas
Asia Pacific
Europe & Africa
The ageing of Cardno’s trade receivables at the reporting date was:
2012
$’000
62,830
87,853
13,020
5,211
168,914
2011
$’000
54,524
44,680
8,240
5,595
113,039
Not past due (current)
Past due 0-30 days (30 day ageing)
Past due 31-60 days (60 day ageing)
Past due more than 60 days
2012
2011
Gross
$’000
Impairment
$’000
Gross
$’000
Impairment
$’000
96,743
41,904
13,973
28,527
181,147
-
-
-
12,233
12,233
58,428
31,056
7,895
22,036
119,415
-
-
-
6,376
6,376
Cardno establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade
and other receivables. The main components of this allowance are a specific loss component that relates to
individually significant exposures, and a collective loss component established for groups of similar assets in
respect of losses that have been incurred but not yet identified. The collective loss allowance is determined on
historical data of payment statistics for similar financial assets. Based on historic default rates, Cardno believes
that no impairment allowance is necessary in respect of receivables less than 60 days.
Page 64 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
32. FINANCIAL RISK MANAGEMENT CONTINUED
The movement in the provision for impairment in respect of trade receivables of Cardno during the year was as
follows:
Balance at 1 July
Impairment loss recognised
Receivables written off
Increase through entities acquired
Effect of foreign exchange
Balance at 30 June
Liquidity risk
2012
$’000
2011
$’000
6,376
3,757
(2,551)
4,427
224
12,233
8,986
3,713
(6,622)
1,212
(913)
6,376
Liquidity risk is the risk that Cardno will not be able to meet its financial obligations as they fall due. Prudent
liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate
amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, Cardno aims to
maintain flexibility in funding by keeping sufficient committed credit lines available to meet Cardno’s requirements.
The following are the contractual maturities of financial liabilities, including estimated interest payments and
excluding the impact of netting agreements:
30 June 2012
Non-derivative financial liabilities
Trade and other payables
Finance leases & hire purchase
Bank loans*
Carrying
amount
$’000
Contractual
cash flows
$’000
Less than
1 year
$’000
1 – 5 years
$’000
Over 5
years
$’000
130,632
6,125
192,717
130,632
7,540
193,084
130,632
2,537
470
-
5,003
192,614
329,474
331,256
133,629
197,617
* Bank loans are term facilities maturing on various dates between December 2014 and December 2016
30 June 2011
Non-derivative financial liabilities
Trade and other payables
Finance leases & hire purchase
Bank loans
Market risk
(a) Foreign exchange risk
Carrying
amount
$’000
Contractual
cash flows
$’000
Less than
1 year
$’000
1 – 5 years
$’000
Over 5
years
$’000
153,584
4,978
101,416
153,584
6,100
101,635
153,584
2,351
238
-
3,749
101,397
259,978
261,319
156,173
105,146
-
-
-
-
-
-
-
-
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are
denominated in a currency that is not the functional currency of the respective Group entities. Cardno operates
internationally and is exposed to foreign exchange risk arising from the currency exposure to the Australian dollar.
Cardno does not engage in any transactions which are of a speculative nature.
Page 65 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
32. FINANCIAL RISK MANAGEMENT CONTINUED
Market risk continued
Cardno borrows funds in foreign currencies to hedge its net investments in foreign operations. Cardno has loans
totalling $184.2 million
(USD) and $9.8 million
(2011: $11.0 million) denominated in pounds sterling (GBP) which have been designated as hedges of Cardno’s
net investments in subsidiaries with functional currencies in those currencies.
(2011: $91.3 million) denominated
in US dollars
As at 30 June 2012, a 10% strengthening of the Australian dollar against the USD and GBP would have increased
equity by $16.7 million (2011: $8.3 million) and $0.9 million (2011: $1.0 million) respectively. A 10% weakening
of the Australian dollar against the USD and GBP would have decreased equity by $20.5 million
(2011: $10.1 million) and $1.1 million (2011: $1.2 million) respectively. There would be no impact on profit and
loss as the loans are designated as net investment hedges.
Other than interest bearing liabilities, there are no other significant foreign currency exposures in relation to
financial instruments at year end.
(b) Interest rate risk
Cardno manages its exposure to interest rate fluctuation by continuously monitoring its debt to ensure any
significant movement would not have a material impact on the performance of Cardno. Cardno does not engage in
any transactions which are of a speculative nature.
At the reporting date the interest rate profile of Cardno’s interest-bearing financial instruments was:
Variable rate instruments
Cash assets
Bank loans
Fixed rate instruments
Finance leases & hire purchase
Bank loans
Group sensitivity
30 June 2012
30 June 2011
Effective
Interest
Rate
1.72%
2.20%
7.61%
2.77%
Balance
$’000
107,856
(192,614)
(84,758)
Effective
Interest
Rate
2.43%
2.48%
(6,125)
(103)
(6,228)
7.89%
8.00%
Balance
$’000
84,047
(101,408)
(17,361)
(4,978)
(8)
(4,986)
At 30 June 2012, if interest rates had changed by -/+ 50 basis points from the year-end rates with all other
variables held constant, profit after tax for the year would have been $297,000 higher/lower (2011: $64,000
higher/lower), mainly as a result of lower/higher interest expense on variable bank loans partially offset by
higher/lower interest income from cash and cash equivalents. There have been no changes in the underlying
assumptions from the previous year.
Fair values
The carrying values of financial assets and liabilities approximate their fair values due to their relatively short term
nature.
Capital risk management
Cardno’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that
they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, Cardno may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Page 66 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
32. FINANCIAL RISK MANAGEMENT CONTINUED
Market risk continued
The Board of Directors monitors the return on capital, which Cardno defines as net operating income divided by
total shareholders’ equity. The Board of Directors also monitors the level of dividends to ordinary shareholders.
33. BUSINESS COMBINATIONS
Year ended 30 June 2012
(a) ATC Associates Inc
In February 2012, Cardno acquired ATC Associates Inc, a major 1,600 person consulting services firm providing
environmental, building sciences, geotechnical and construction material testing and other consultancy services
headquartered in Lafayette, Louisiana, USA. The effective date of acquisition was 1 March 2012.
For the period 1 March 2012 - 30 June 2012, the acquired business contributed revenues of $65,645,626 and
net profit after tax of $2,342,895. If the acquisition had occurred on 1 July 2011 revenue and net profit after tax
for Cardno would have been $1,094,806,210 and $77,205,611 respectively.
Details of acquisition
Purchase Consideration
Cash
Vendor liability
Total purchase consideration
Fair value of net identifiable assets acquired*
Goodwill
$’000
90,864
4,646
95,510
22,366
73,144
The acquisition of ATC was completed on 29 February 2012. Accordingly, the accounting for this acquisition has been
completed on a provisional basis. Further analysis will be performed to determine and true up the fair value of identifiable
assets acquired and liabilities assumed as part of the acquisition.
At the time of purchase the vendors of ATC subscribed for shares in Cardno Limited to the value of $572,992.
The fair value of the ordinary shares issued was based on the 10 day volume weighted average price (VWAP).
The fair value price was $5.68 for the purchase of shares by vendors of ATC issued 29 February 2012.
The purchase consideration for ATC includes a deferred settlement of USD$5,000,000 which is payable 18
months after completion.
The goodwill recognised is attributable to the skills and technical talent of the employees of ATC and the synergies
expected to be achieved from integrating the business into Cardno's existing operations. The goodwill is not
expected to be deductible for tax purposes.
The assets and liabilities arising from the acquisition are as follows:
Cash
Receivables
Property, plant and equipment
Inventories
Deferred tax assets
Intangible assets
Creditors & borrowings
Deferred tax liabilities
Provisions
Net identifiable assets acquired
Fair Value
$’000
106
31,402
3,133
13,087
994
2,078
(18,660)
(690)
(9,084)
22,366
Page 67 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
33. BUSINESS COMBINATIONS CONTINUED
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid
Cash balance acquired
Outflow of cash
(b) TEC, Inc
90,864
106
90,758
In October 2011 Cardno acquired TEC, Inc a 330-person consulting firm with specialist expertise in environmental
management, asset management and marine infrastructure management especially related to port infrastructure
and defence facilities. Headquartered in Charlottesville, Virginia, USA, TEC has 15 mainland U.S. offices and
5 off-shore offices including Hawaii, Guam, Germany, Belgium and Italy.
The effective date of the acquisition was 1 October 2011, and the acquired business contributed revenues of
$45,850,310 and net profit after tax of $2,806,043 to Cardno for the year. If the acquisition had occurred on
1 July 2011 revenue and net profit after tax for Cardno would have been $978,311,684 and $74,988,073
respectively.
Details of acquisition
Purchase Consideration
Cash
Vendor liability and contingent consideration
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$’000
45,716
9,199
54,915
13,300
41,615
At the time of purchase the vendors of TEC subscribed for shares in Cardno Limited to the value of $6,425,389.
The fair value of the ordinary shares issued was based on the 10 day volume weighted average price (VWAP).
The fair value price was $4.83 for the purchase of shares by vendors of TEC issued 13 February 2012.
The purchase consideration for TEC includes deferred settlement of US$563,636 which is payable 24 months
after completion.
Cardno Limited has agreed to pay the selling shareholders of TEC additional consideration of USD$8,330,000 if
the acquiree’s normalised EBITDA over the period 2 October 2011 to 28 September 2012 is USD$7,200,000 or
more. This amount has been included in the purchase consideration based on estimates of the acquiree’s financial
performance over the earn-out period. Where the normalised EBITDA is between USD$6,000,000 and
USD$7,200,000 the payment will be pro-rated.
The goodwill recognised is attributable to the skills and technical talent of the employees of TEC and the synergies
expected to be achieved from integrating the business into Cardno’s existing operations. The goodwill is expected
to be deductible for tax purposes.
The assets and liabilities arising from the acquisition are as follows:
Cash
Receivables
Property, plant and equipment
Deferred tax assets
Intangible assets
Creditors & borrowings
Provisions
Net identifiable assets acquired
Fair Value
$’000
4,185
11,170
649
1,164
4,544
(7,811)
(601)
13,300
Page 68 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
33. BUSINESS COMBINATIONS CONTINUED
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid
Cash balance acquired
Outflow of cash
45,716
4,185
41,531
(c) Lane Piper Pty Ltd, Geotech Solutions Pty Ltd and Humphrey Reynolds Perkins Group
During the year ended 30 June 2012 Cardno acquired Lane Piper Pty Ltd with an effective date of 1 September
2011, Geotech Solutions Pty Ltd with an effective date of 1 October 2011, and Humphrey Reynolds Perkins (HRP)
Group with an effective date 1 November 2011.
Lane Piper is an environmental and geotechnical engineering firm with around 40 staff and is based in Melbourne.
Geotech Solutions is a geotechnical engineering, and construction material testing firm based in Newcastle with
around 22 staff. HRP is a town planning consultancy, environmental planning and landscape architecture group
based in Brisbane and has around 62 staff.
The acquired business contributed revenues of $16,722,466 and net profit after tax of $2,370,625 to Cardno for
the year. If the acquisitions had occurred on 1 July 2011 revenue and net profit after tax for Cardno would have
been $972,010,107 and $74,735,027 respectively.
Details of acquisitions
Purchase Consideration
Cash
Vendor liability and contingent consideration
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$’000
19,651
1,373
21,024
3,586
17,438
At the time of purchase the vendors of Lane Piper subscribed for shares in Cardno Limited to the value of
$1,074,304, the vendors of Geotech Solutions subscribed for shares in Cardno Limited to the value of $281,698
and the vendors of HRP subscribed for shares in Cardno Limited to the value of $3,312,499. The fair value of the
ordinary shares issued was based on the 10 day volume weighted average price (VWAP). The fair value price was
$5.15 for the purchase of shares by vendors of Lane Piper issued 19 September 2011, $4.69 for the purchase of
shares by vendors of Geotech Solutions issued 21 October 2011 and $5.34 for the purchase of shares by vendors
of HRP issued 25 November 2011.
Cardno Limited has agreed to pay the selling shareholders of Lane Piper additional consideration of $1,000,000 if
the acquiree’s normalised EBIT over the period 1 September 2011 to 31 August 2012 is $1,100,000 or more.
This amount has been included in the purchase consideration based on estimates of the acquiree’s financial
performance over the earn-out period. Where the normalised EBIT is between $850,000 and $1,100,000 the
payment will be pro-rated.
Cardno Limited has agreed to pay the selling shareholders of Geotech Solutions additional consideration of
$373,215 if the acquiree’s normalised EBIT over the period 1 October 2011 to 30 September 2012 is $500,000
or more. This amount has been included in the purchase consideration based on estimates of the acquiree’s
financial performance over the earn-out period. Where the normalised EBIT is between $375,596 and $500,000
the payment will be pro-rated.
The goodwill recognised is attributable to the skills and technical talent of the employees of Lane Piper, Geotech
Solutions and HRP and the synergies expected to be achieved from integrating the business into Cardno’s existing
operations. The goodwill will not be deductible for tax purposes.
Page 69 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
33. BUSINESS COMBINATIONS CONTINUED
The assets and liabilities arising from the acquisitions are as follows:
Cash
Receivables
Property, plant and equipment
Inventories
Creditors & borrowings
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid
Cash balance acquired
Outflow of cash
Year ended 30 June 2011
(a) JF New & Associates
Fair Value
$’000
2,980
3,657
1,680
320
(3,944)
(1,107)
3,586
19,651
2,980
16,671
In December 2010, Cardno acquired JF New & Associates (JFNEW), an environmental consulting firm specialising
in natural resources management, environmental permitting, habitat restoration, mitigation banking, native plant
materials and cultural resources consulting. The effective date was 31 December 2010.
For the period 1 January 2011 - 30 June 2011, the acquired business contributed revenues of $7,919,751 and
net profit after tax of $596,691. If the acquisition had occurred on 1 July 2010 revenue and NPAT for Cardno
would have been $842,869,782 and $59,874,331 respectively.
Details of acquisition
Purchase Consideration
Cash
Vendor liability and contingent consideration
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$’000
9,655
2,528
12,183
4,708
7,475
At the time of purchase the vendors of JFNEW subscribed for shares in Cardno Ltd to the value of $2,409,835.
The fair value of the ordinary shares issued was based on the 10 day VWAP of Cardno Ltd shares. The fair value
price was $5.43 for the purchase of shares by vendors of JF New issued 7 January 2011.
Cardno Limited agreed to pay the selling shareholders of JFNEW, additional consideration of USD$2,000,000 if
the acquiree’s normalised EBITDA over the period 1 January 2011 to 31 December 2012 was USD$2,400,000.
This has now been achieved and was paid during the year ended 30 June 2012. The hold back consideration was
due and payable 18 months after completion. This amount was paid on 2 July 2012 in accordance with the Share
Sale Agreement.
The goodwill is attributable to the skills and technical talent of the employees of JFNEW and the synergies
expected to be achieved from integrating the Company into Cardno’s existing operations.
Page 70 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
33. BUSINESS COMBINATIONS CONTINUED
The assets and liabilities arising from the acquisition are as follows:
Cash
Receivables
Property, plant and equipment
Inventories
Creditors & borrowings
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid
Cash balance acquired
Outflow of cash
(b) Roadtest Services Pty Ltd
Fair Value
$’000
606
1,997
2,467
339
(568)
(133)
4,708
9,655
606
9,049
In June 2011, Cardno acquired Roadtest Services Pty Ltd, an Australian based construction materials testing and
geotechnical engineering firm with around 60 staff based in Central Queensland. The effective date of acquisition
was 1 April 2011.
For the period 1 April 2011 - 30 June 2011, the acquired business contributed revenues of $2,428,405 and net
profit after tax of $975,569. If the acquisition had occurred on 1 July 2010 revenue and NPAT for Cardno would
have been $839,067,516 and $61,106,731 respectively.
Details of acquisition
Purchase Consideration
Cash
Vendor liability and contingent consideration
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$’000
12,285
-
12,285
965
11,320
At the time of purchase the vendors of Roadtest Services Pty Ltd subscribed for shares in Cardno Ltd to the value
of $3,071,322. The fair value of the ordinary shares issued was based on the 5 day VWAP of Cardno Ltd shares
in the 5 days prior to the date of issuance of the shares. The fair value price was $5.66 for the purchase of shares
by vendors of Roadtest issued 15 June 2011.
The goodwill is attributable to the skills and technical talent of the employees of Roadtest Services and the
synergies expected to be achieved from integrating the company into Cardno’s existing operations.
Page 71 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
33. BUSINESS COMBINATIONS CONTINUED
The assets and liabilities arising from the acquisition are as follows:
Cash
Receivables
Property, plant and equipment
Creditors & borrowings
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid
Cash balance acquired
Outflow of cash
Fair Value
$’000
631
478
502
(139)
(507)
965
12,285
631
11,654
During the current year, the accounting for this acquisition was finalised and as such amounts that had previously
been determined provisionally have been revised and reflected in the tables above.
(c) BEC Engineering Pty Ltd
In June 2011 Cardno acquired BEC Engineering Pty Ltd, an Australian based electrical engineering services firm
with around 100 staff. The effective date of acquisition was 1 June 2011.
For the period 1 June to 30 June 2011, the acquired business contributed revenues of $3,783,473 and net profit
after tax of $599,795. If the acquisition had occurred on 1 July 2010 revenue and NPAT for Cardno would have
been $863,137,384 and $63,959,562 respectively.
Details of acquisition
Purchase Consideration
Cash
Vendor liability and contingent consideration
Total purchase consideration
Fair value of net identifiable assets acquired
Goodwill
$’000
51,310
1,000
52,310
13,159
39,151
Under the purchase agreement, the vendors of BEC subscribed for shares in Cardno Ltd to the value of
$11,250,015. The fair value of the ordinary shares issued was based on the 5 day VWAP of Cardno Ltd shares in
the 5 days prior to the date of issuance of the shares. The fair value price was $5.52 for the purchase of shares
by vendors of BEC issued 6 July 2011.
Cardno Limited has agreed to pay the selling shareholders of BEC Group additional consideration of $1,000,000 if
the acquiree’s normalised EBIT over the period 1 July 2011 to 30 June 2012 is $9,000,000 or more. As at
30 June 2012, the earn-out had been achieved but not paid.
The goodwill is attributable to the skills and technical talent of the employees of the BEC Group and the synergies
expected to be achieved from integrating the company into Cardno’s existing operations.
Page 72 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
33. BUSINESS COMBINATIONS CONTINUED
The assets and liabilities arising from the acquisition are as follows:
Cash
Receivables
Deferred tax assets
Property, plant and equipment
Inventories
Intangible assets
Creditors and borrowings
Deferred tax liabilities
Provisions
Net identifiable assets acquired
Outflow of cash to acquire subsidiaries, net
of cash acquired
Cash consideration paid*
Cash balance acquired
Outflow of cash
Fair Value
$’000
8,853
6,532
1,290
1,140
699
1,297
(3,717)
(610)
(2,325)
13,159
51,310
8,853
42,457
The cash component of the purchase consideration was paid on 6 July 2011. As at 30 June 2011, the
amount payable of $51,310,000 had been recognised as a vendor liability and included in note 15.
During the current year, the accounting for this acquisition was finalised and as such amounts that had previously
been determined provisionally have been revised and reflected in the tables above.
34. SEGMENT INFORMATION
Cardno has three reportable segments managed separately by location and service provided. Internal management
reports on the performance of these reportable segments are reviewed monthly by the Managing Director, Chief
Financial Officer and Group Operations Manager. The following summary describes the operations in each of
Cardno’s reportable segments:
-
-
-
Professional Services Australia and New Zealand – provides consulting engineering, planning, surveying,
landscape architecture, environmental services, electrical engineering and geotechnical services in that
region.
Professional Services Americas and Software – provides consulting engineering, planning, surveying,
landscape architecture and environmental services in the Americas and software sales globally.
International Development Assistance – manages aid projects on behalf of unilateral and multilateral
government agencies and private clients.
Comparative segment information has been represented in conformity with the requirement of AASB 8 Operating
Segments.
Page 73 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
34. SEGMENT INFORMATION CONTINUED
2012
Segment revenue
Fees from services
and sale of goods
Fees from
recoverable expenses
Inter-segment
revenue
External sales
Other income
Total segment revenue
Segment result
before financing costs
Professional
Services
Australia & NZ
$’000
Professional
Services
Americas &
Software
$’000
International
Development
Assistance
Total
$’000
$’000
321,809
316,879
73,320
712,008
41,497
136,256
72,799
250,552
-
(150)
(2,461)
(2,611)
363,306
2,235
365,541
452,985
861
453,846
143,658
901
144,559
959,949
3,997
963,946
55,920
49,224
5,371
110,515
Segment assets
338,937
475,932
99,734
914,603
Segment liabilities
71,583
72,914
36,347
180,844
Other
Acquisitions of non-
current assets
Depreciation and
amortisation of
assets
2011
Segment revenue
Fees from services
and sale of goods
Fees from
recoverable expenses
Inter-segment
revenue
External sales
Other income
Total segment revenue
Segment result
before financing costs
27,933
134,222
204
162,359
8,211
7,465
435
16,111
Professional
Services
Australia & NZ
$’000
Professional
Services
Americas &
Software
$’000
International
Development
Assistance
Total
$’000
$’000
229,607
257,303
84,282
571,192
26,022
184,701
46,844
257,567
-
(133)
(960)
(1,093)
255,629
758
256,387
441,871
447
442,318
130,166
382
130,548
827,666
1,587
829,253
34,021
51,806
4,175
90,002
Segment assets
285,907
272,162
90,876
648,945
Segment liabilities
128,778
19,404
48,059
196,241
Other
Acquisitions of non-
current assets
Depreciation and
amortisation of
assets
58,852
13,643
542
73,037
6,325
4,512
519
11,356
Page 74 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
34. SEGMENT INFORMATION CONTINUED
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities
2006
$’000
2005
$’000
2012
$’000
2011
$’000
Revenues
Total revenue for reportable segments
Interest revenue
Consolidated revenue
Profit or loss
Reportable segment result before net financing costs
Interest Revenue
Finance costs
Other corporate (costs)/gains
Profit before tax
Income tax expense
Profit after tax
Assets
Total assets for reportable segments
Other assets
Unallocated assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Bank loans unallocated
Other unallocated liabilities
Consolidated total liabilities
Geographical information
963,946
1,874
829,253
1,948
965,820
831,201
110,515
1,874
(7,500)
153
105,042
(30,874)
90,002
1,948
(4,501)
(3,146)
84,303
(25,501)
74,168
58,802
914,603
31,386
12,760
648,945
-
32,667
958,749
681,612
180,844
194,012
35,008
196,241
102,344
25,831
409,864
324,416
In presenting information on a geographical basis segment revenue from external customers and segment assets
are attributed based on geographic locations of business unit.
Australia & NZ
Americas
Asia Pacific
UK & Africa
Other segments
2012
2011
Revenues
$’000
421,173
491,614
26,129
25,030
-
963,946
Total
Non-Current
Assets
$’000
230,846
301,258
285
18,440
12,514
563,343
Revenues
$’000
306,471
480,874
15,334
26,574
-
829,253
Total
Non-Current
Assets
$’000
151,534
214,160
687
21,785
6,130
394,296
Page 75 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
35. PARENT ENTITY DISCLOSURES
As at, and throughout, the financial year ending 30 June 2012 the parent Company of Cardno was Cardno
Limited.
Results of the parent entity
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Financial position of the parent entity at year end
Current assets
Total assets
Current liabilities
Total liabilities
Total equity of the parent entity comprising of:
Share capital
Revaluation reserve
Retained earnings
Total equity
Parent entity contingencies
Bank guarantees
Company
2
5
2012
$’000
2011
$’000
88,244
-
88,244
42,696
-
42,696
397,454
621,852
86,013
86,013
291,975
449,661
108,086
108,141
460,948
-
74,891
311,383
-
30,137
535,839
341,520
2,290
2,214
A multiple guarantee facility is available to Cardno totalling $19 million (2011: $19 million). The facility is secured
by an unlimited interlocking guarantee and indemnity.
The directors are of the opinion that provisions are not required in respect of these matters, as it is not probable
that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement.
Parent entity guarantees in respect of debts of its subsidiaries
The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts
in respect of its subsidiaries.
Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed, are disclosed below in
note 36.
Page 76 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
36. DEED OF CROSS GUARANTEE
Pursuant to ASIC Class Order 98/1418 (as amended) dated 13 August 1998, the wholly-owned subsidiaries listed
below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial
reports, and Directors’ reports.
It is a condition of the Class Order that the Company and each of the subsidiaries enter into a Deed of Cross
Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full for any debt in
the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a
winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six
months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that
the Company is wound up.
The subsidiaries subject to the Deed are:
- Cardno Holdings Pty Ltd
- Cardno (Qld) Pty Ltd
- Cardno Staff Pty Ltd
- Cardno Bowler Pty Ltd
- Cardno Emerging Markets (Australia) Pty Ltd
- Cardno (NSW/ACT) Pty Ltd
A consolidated statement of comprehensive income and consolidated statement of financial position, comprising
the Company and controlled entities which are a party to the Deed, after eliminating all transactions between
parties to the Deed of Cross Guarantee, for the year ended 30 June 2011 is set out as follows:
Statement of comprehensive income and retained earnings
Revenue
Employee expenses
Consumables and materials used
Sub-consultant and contractor costs
Depreciation and amortisation expenses
Finance costs
Other expenses
Profit before income tax
Income tax expense
Net profit for the year
Other comprehensive income for the year
Total comprehensive income for the year
Retained earnings at the beginning of the year
Transfers to and from reserves
Dividends recognised during the year
Retained earnings at the end of the year
Attributable to:
Owners of the Company
6
0
2005
$’000
2012
$’000
2011
$’000
395,664
287,971
(168,194)
(82,989)
(36,868)
(31)
(6,836)
4,078
104,824
(9,702)
95,122
2,011
97,133
37,625
(2,011)
(43,488)
(143,792)
(50,712)
(41,983)
(50)
(3,883)
725
48,276
(7,184)
41,092
(2,639)
38,453
30,508
2,639
(33,975)
89,259
37,625
89,259
37,625
Page 77 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
36. DEED OF CROSS GUARANTEE CONTINUED
Statement of financial position
6
0
2005
$’000
2012
$’000
2011
$’000
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Trade and other receivables
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Other non-current assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Current tax liabilities
Short term provisions
Other current liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Interest-bearing loans and borrowings
Deferred tax liabilities
Long term provisions
Other non-current liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Retained earnings
TOTAL EQUITY
26,190
534,496
28,804
772
24,422
294,771
18,569
879
590,262
338,641
-
348,738
152
7,549
41,849
881
-
269,304
517
6,571
40,738
370
399,169
317,500
989,431
656,141
197,096
13,061
13,071
9,361
172,485
6,681
10,935
6,776
232,589
196,877
194,012
6,231
8,304
34
102,344
4,497
7,333
31
208,581
114,205
441,170
311,082
548,261
345,059
460,949
(1,947)
89,259
311,384
(3,950)
37,625
548,261
345,059
Page 78 of 86
Notes to the Consolidated Financial Statements
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
37. CONTROLLED ENTITIES
Cardno’s significant subsidiaries are listed below.
Name
Country of Incorporation
Equity Holding
Cardno Holdings Pty Ltd
Cardno (Qld) Pty Ltd
Cardno Staff Pty Ltd
Cardno Staff No. 2 Pty Ltd
Cardno Operations Pty Ltd
Cardno International Pty Ltd
Cardno (WA) Pty Ltd
Cardno CCS Pty Ltd
Cardno Lawson Treloar Pty Ltd
Cardno (NSW/ACT) Pty Ltd
Cardno Willing Pty Ltd
Cardno Victoria Pty Ltd
Cardno Emerging Markets (Australia) Pty Ltd
Cardno UK Limited
Cardno Emerging Markets (UK) Limited
Cardno Emerging Markets (East Africa) Limited
Cardno NZ Limited
Cardno Holdings New Zealand Limited
Cardno USA, Inc.
Cardno Emerging Markets (USA), Ltd
Emerging Markets Group (EMG) s.a.
Cardno WRG, Inc.
Cardno TCB Limited
Cardno (NT) Pty Ltd
Cardno (PNG) Ltd
XP Software Pty Ltd
XP Software Inc.
Micro Drainage Limited
Cardno Bowler Pty Ltd
TBE Group, Inc
TBE Holdings, Inc
Cardno ITC Pty Ltd
Cardno Australian Underground Services Pty Ltd
Environmental Resolutions, Inc
ENTRIX Holding Company
ENTRIX Inc
ENTRIX Americas, SA
Cardno JF New, Inc
Cardno Roadtest Pty Ltd
Cardno BEC Pty Ltd
Cardno BEC (Qld) Pty Ltd
Cardno (Colombia) S.A.S.
Cardno Humphrey Reynolds Perkins Pty Ltd
Cardno Humphrey Reynolds Perkins Jewell Pty Ltd
Cardno Humphrey Reynolds Perkins Gold Coast Pty Ltd
Cardno Humphrey Reynolds Perkins Sunshine Coast Pty Ltd
Cardno Chenoweth Environmental Planning & Landscape
Architecture Pty Ltd
Cardno Lane Piper Pty Ltd
Moriedale Holdings Pty Ltd
Geotech Solutions Pty Limited
TEC, Inc
ATC & Associates Inc
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United Kingdom
United Kingdom
Kenya
New Zealand
New Zealand
United States of America
United States of America
Belgium
United States of America
New Zealand
Australia
Papua New Guinea
Australia
United States of America
United Kingdom
Australia
United States of America
United States of America
Australia
Australia
United States of America
United States of America
United States of America
Ecuador
United States of America
Australia
Australia
Australia
Colombia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States of America
United States of America
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Page 79 of 86
Directors’ Declaration
Cardno Limited and its Controlled Entities for the year ended 30 June 2012
1.
In the opinion of the Directors of Cardno Limited (the Company):
(a)
the consolidated financial statements and notes set out on pages 32 to 79 and the Remuneration Report
in section 11 of the Directors’ Report, set out on pages 7 to 21, are in accordance with the
Corporations Act 2001, including:
(i) giving a true and fair view of Cardno’s financial position as at 30 June 2012 and of its performance
for the financial year ended on that date; and
(i)
complying with Australian Accounting Standards
Interpretations) and the Corporations Regulations 2001; and
(including
the Australian Accounting
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
2. There are reasonable grounds to believe that the Company and Cardno entities identified in Note 37 will be
able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of
Cross Guarantee between the Company and those Group entities pursuant to ASIC Class Order 98/1418.
3. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from
the Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2012.
4. The Directors draw attention to Note 1(a) to the consolidated financial statements, which includes a
statement of compliance with International Financial Reporting Standards.
Dated at Brisbane on the 13th day of August 2012.
Signed in accordance with a resolution of the Directors.
JOHN C MASSEY
Chairman
Page 80 of 86
ABCD
Independent auditor’s report to the members of Cardno Limited
Report on the financial report
We have audited the accompanying financial report of Cardno Limited (the Company), which
comprises the consolidated statement of financial position as at 30 June 2012, and consolidated
statement of financial performance, consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the
year ended on that date, notes 1 to 37, comprising a summary of significant accounting policies
and other explanatory information, and the directors’ declaration of the Group comprising the
Company and the entities it controlled at the year’s end or from time to time during the financial
year.
Directors’ responsibility for the financial report
The directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that is free from material misstatement whether due
to fraud or error. In note 1(a), the directors also state, in accordance with Australian Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements of the
Group comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance whether the financial
report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the financial report, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity’s preparation of the financial report that gives a true and fair view in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by the directors, as well as evaluating the overall presentation of the financial
report.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Page 81 of 86
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
ABCD
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
a)
the financial report of the Group is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2012 and
of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001;
b) the financial report also complies with International Financial Reporting Standards as
disclosed in note 1(a).
Report on the remuneration report
We have audited the Remuneration Report included on pages 7 to 21 of the Directors’ Report for
the year ended 30 June 2012. The directors of the Company are responsible for the preparation
and presentation of the Remuneration Report in accordance with Section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report,
based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the Remuneration Report of Cardno Limited for the year ended 30 June 2012,
complies with Section 300A of the Corporations Act 2001.
KPMG
Robert S Jones
Partner
Brisbane
13 August 2012
Page 82 of 86
Additional Shareholder Information
Distribution of Ordinary Shareholders
The number of shareholders, by size of holding, as at 31 August 2012 were:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and over
Total
Ordinary Shares
Number of
Holders
5,918
4,122
1,168
1,164
124
12,496
Number of
Shares
2,195,579
10,155,987
8,375,457
28,516,165
89,334,856
138,578,044
As at 31 August 2012 there were 660 shareholders who held less than a marketable parcel of 68 shares.
Twenty Largest Ordinary Shareholders
The names of the twenty largest holders as at 31 August 2012 were:
J P Morgan Nominees Australia Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
BNP Paribas Noms Pty Ltd
Andrew Buckley
Geoffrey Allen Bailey & Wendy Ann Bailey
Pat Beyer
Trevor Johnson
Citicorp Nominees Pty Limited
Equity Trustees Limited
Steve M Zigan
Malcolm David Pound
Paul Gardiner
Merrill Lynch (Australia) Nominees Pty Limited
Graham Tamblyn
Joseph E O’Connell
Citicorp Nominees Pty Limited
Anne Felicity Phillips
R A Young Investments Pty Ltd
Total
Substantial Shareholders
Listed Ordinary Shares
Number Held
16,113,737
14,892,036
9,252,561
5,630,298
3,187,102
2,420,261
1,875,508
1,617,179
1,600,174
1,397,745
1,140,000
1,006,015
998,284
971,458
905,975
852,338
791,648
788,967
780,000
770,000
66,991,286
Percentage
11.63%
10.75%
6.68%
4.06%
2.30%
1.75%
1.35%
1.17%
1.15%
1.01%
0.82%
0.73%
0.72%
0.70%
0.65%
0.62%
0.57%
0.57%
0.56%
0.56%
48.35%
There are currently no shareholders who have notified the company as being substantial shareholders in
accordance with section 671B of the Corporations Act 2001.
Voting Rights
All ordinary shares (whether fully paid or not) carry one vote per share without restriction.
Page 83 of 86
Additional Shareholder Information
Escrowed Shares
There are currently 5,086,654 ordinary shares held in escrow. This is approximately 3.02% of the company’s
issued share capital. The details are as follows:-
In accordance with the Share Sale Agreement between Cardno Limited and the shareholders of Roadtest
completed on 15 June 2011, ordinary shares issued as part of the purchase price are escrowed for a
period of 18 months to 15 December 2012. This agreement affects 542,189 shares, being
approximately 0.39% of the company’s issued share capital.
In accordance with the Share Sale Agreement between Cardno Limited and the shareholders of
BEC Engineering Pty Ltd completed on 6 July 2011, ordinary shares issued as part of the purchase price
are escrowed for a period of 18 months to 6 January 2013. This agreement affects 1,820,495 shares,
being approximately 1.31% of the company’s issued share capital.
In accordance with the Share Sale Agreement between Cardno Limited and the shareholders of
Lane & Piper Pty Ltd completed on 19 September 2011, ordinary shares issued as part of the purchase
price are escrowed for a period of 18 months to 19 March 2013. This agreement affects 208,792
shares, being approximately 0.15% of the company’s issued share capital.
In accordance with the Share Sale Agreement between Cardno Limited and the shareholders of Geotech
Solutions Pty Ltd completed on 21 October 2011, ordinary shares issued as part of the purchase price are
escrowed for a period of 18 months to 21 April 2013. This agreement affects 60,107 shares, being
approximately 0.04% of the company’s issued share capital.
In accordance with the Share Sale Agreement between Cardno Limited and the shareholders of
Humphreys Reynolds Perkins Group completed on 25 November 2011, ordinary shares issued as part of
the purchase price are escrowed for a period of 18 months to 25 May 2013. This agreement affects
620,338 shares, being approximately 0.45% of the company’s issued share capital.
In accordance with the Share Sale Agreement between Cardno Limited and the shareholders of
Locom Australia Pty Ltd completed on 19 January 2012, ordinary shares issued as part of the purchase
price are escrowed for a period of 18 months to 19 July 2013. This agreement affects 1,907 shares,
being approximately 0.001% of the company’s issued share capital.
In accordance with the Stock Purchase Agreement between Cardno Limited and the shareholders of
TEC Inc completed on 13 February 2012, ordinary shares issued as part of the purchase price are
escrowed for a period of 18 months to 17 April 2013. This agreement affects 1,330,044 shares, being
approximately 0.96% of the company’s issued share capital.
In accordance with the Agreement and Plan of Merger between Cardno Limited and the shareholders of
ATC Group Holdings Inc completed on 29 February 2012, ordinary shares issued as part of the purchase
price are escrowed for a period of 18 months to 29 August 2013. This agreement affects 100,884
shares, being approximately 0.07% of the company’s issued share capital.
In accordance with the Stock Purchase Agreement between Cardno Limited and the shareholders of
EM-Assist Inc completed on 4 July 2012, ordinary shares issued as part of the purchase price are
escrowed for a period of 18 months to 3 January 2014. This agreement affects 48,665 shares, being
approximately 0.04% of the company’s issued share capital.
In accordance with the Stock Purchase Agreement between Cardno Limited and the shareholders of
Marshall Miller & Associates Inc completed on 4 July 2012, ordinary shares issued as part of the
purchase price are escrowed for a period of 18 months to 3 January 2014. This agreement affects
281,595 shares, being approximately 0.20% of the company’s issued share capital.
In accordance with the Share Sale Agreement between Cardno Limited and the shareholders of Better
Technical Options completed on 27 August 2012, ordinary shares issued as part of the purchase price are
escrowed for a period of 18 months to 27 February 2014. This agreement affects 71,638 shares, being
approximately 0.05% of the company’s issued share capital.
Page 84 of 86
Additional Shareholder Information
Options
As at 31 August 2012 the details of Performance Options on issue are as follows:
Number of Option Holders
Number of Options on Issue
548
9,144,200
Voting Rights of Options
The ordinary shares issued on exercise of the options will rank equally with all other ordinary shares.
Rights
As at 31 August 2012 the details of Performance Rights on issue are as follows:
Number of Rights Holders
Number of Rights on Issue
26
1,516,500
Voting Rights of Rights
The ordinary shares issued on exercise of the rights will rank equally with all other ordinary shares
Page 85 of 86
Lawyers
McCullough Robertson Lawyers
Level 11, Central Plaza Two
66 Eagle Street
BRISBANE QLD 4000
Ph: +61 7 3233 8888
Fax: +61 7 3229 9949
Website: www.mccullough.com.au
Kirkland & Ellis LLP
300 North LaSalle
Chicago, Illinois 60654
USA
Ph: +1 312 862 2000
Fax: +1 312 862 2200
Website: www.kirkland.com
Bankers
HSBC Bank Australia Limited
300 Queen Street
BRISBANE QLD 4000
Ph: +61 7 3835 7820
Fax: +61 7 3835 7830
Website: www.hsbc.com.au
Corporate Directory
Board of Directors
Chairman
John Marlay
Managing Director
Andrew Buckley
Directors
Anthony Barnes
Peter Cosgrove
Tonianne Dwyer
Jeffrey Forbes
Trevor Johnson
Ian Johnston
John Massey
Chief Financial Officer & Company Secretary
Jeffrey Forbes
Joint Company Secretary
Michael Pearson
Registered Office
Cardno Limited
ABN 70 108 112 303
Level 11, Green Square North Tower
515 St Paul’s Terrace
FORTITUDE VALLEY QLD 4006
Ph: +61 7 3369 9822
Fax: +61 7 3369 9722
Website: www.cardno.com
Share Registry
Computershare Investor Services Pty Limited
117 Victoria Street
WEST END QLD 4101
Ph: 1300 552 270 (within Australia)
+61 3 9415 4000 (outside Australia)
Website: www.computershare com.au
Auditors
KPMG
Level 16, Riparian Plaza
71 Eagle Street
BRISBANE QLD 4000
Ph: +61 7 3233 3111
Fax: +61 7 3233 3100
Website: www.kpmg.com.au
Page 86 of 86
Registered office
Cardno Limited
ABN 70 108 112 303
Level 11, North Tower
Green Square
515 St Paul’s Terrace
Fortitude Valley
QLD 4006 Australia
Phone + 617 3369 9822
Fax + 617 3369 9722
cardno@cardno.com
www.cardno.com